DP3249 | Non-Linear Equilibrium Corection in US Real Money Balances, 1869-1997

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Several theoretical models of money demand imply non-linear functional forms for the aggregate demand for money characterized by smooth adjustment towards long-run equilibrium. In this Paper, we propose a non-linear equilibrium correction model of US money demand, which is shown to be stable over the sample period from 1869 to 1997.