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Author:Benati, Luca 

Report
Online Appendix for: International Evidence on Long-Run Money Demand
This appendix supports Staff Report 587. An earlier version of this Staff Report circulated as Working Paper 738.
AUTHORS: Benati, Luca; Weber, Warren E.; Nicolini, Juan Pablo; Lucas, Robert E.
DATE: 2019-06-18

Report
International Evidence on Long-Run Money Demand
We explore the long-run demand for M1 based on a dataset comprising 38 countries and relatively long sample periods, extending in some cases to over a century. Overall, we find very strong evidence of a long-run relationship between the ratio of M1 to GDP and a short-term interest rate, in spite of a few failures. The standard log-log specification provides a very good characterization of the data, with the exception of periods featuring very low interest rate values. This is because such a specification implies that, as the short rate tends to zero, real money balances become arbitrarily large, which is rejected by the data. A simple extension imposing limits on the amount that households can borrow results in a truncated log-log specification, which is in line with what we observe in the data. We estimate the interest rate elasticity to be between 0.3 and 0.6, which encompasses the well-known squared-root specification of Baumol and Tobin.
AUTHORS: Lucas, Robert E.; Benati, Luca; Nicolini, Juan Pablo; Weber, Warren E.
DATE: 2019-06-18

Working Paper
International Evidence on Long-Run Money Demand
We explore the long-run demand for M1 based on a data set that has comprised 32 countries since 1851. In many cases, cointegration tests identify a long-run equilibrium relationship between either velocity and the short rate or M1, GDP, and the short rate. Evidence is especially strong for the United States and the United Kingdom over the entire period since World War I and for moderate and high-inflation countries. With the exception of high-inflation countries?for which a ?log-log? specification is preferred?the data often prefer the specification in the levels of velocity and the short rate originally estimated by Selden (1956) and Latan (1960). This is especially clear for the United States and other low-inflation countries.
AUTHORS: Weber, Warren E.; Lucas, Robert E.; Benati, Luca; Nicolini, Juan Pablo
DATE: 2017-02-10

Working Paper
Online Appendix for: International Evidence on Long-Run Money Demand
AUTHORS: Weber, Warren E.; Lucas, Robert E.; Nicolini, Juan Pablo; Benati, Luca
DATE: 2017-02-10

Working Paper
Sales, inventories, and real interest rates : a century of stylized facts
We use Bayesian time-varying parameters structural VARs with stochastic volatility to investigate changes in both the reduced-form and the structural correlations between business inventories and either sales growth or the real interest rate in the United States during both the interwar and the post-WWII periods. We identify four structural shocks by combining a single long-run restriction to identify a permanent output shock as in Blanchard and Quah (1989), with three sign restrictions to identify demand- and supply-side transitory shocks. We produce several new stylized facts which should inform the development of new models of inventories. In particular, we show that (i) during both the interwar and the post-WWII periods, the structural correlation between inventories and the real interest rate conditional on identified interest rate shocks is systematically positive; (ii) the reduced-form correlation between the two series is positive during the post-WWII period, but in line with the predictions of theory it is robustly negative during the interwar era; and (iii) during the interwar era, the correlations between inventories and either of the two other series exhibits a remarkably strong co-movement with output at the business-cycle frequencies.
AUTHORS: Lubik, Thomas A.; Benati, Luca
DATE: 2012

Working Paper
The time-varying Beveridge curve
We use a Bayesian time-varying parameter structural VAR with stochastic volatility to investigate changes in both the reduced-form relationship between vacancies and the unemployment rate, and in their relationship conditional on permanent and transitory output shocks, in the post-WWII United States. Evidence points towards similarities and differences between the Great Recession and the Volcker disinflation, and wide-spread time variation along two key dimensions. First, the slope of the Beveridge curve exhibits a large extent of variation from the mid-1960s on. It is also notably pro-cyclical, whereby the gain is positively correlated with the transitory component of output. The evolution of the slope of the Beveridge curve during the Great Recession is very similar to its evolution during the Volcker recession in terms of both its magnitude and its time profile. Second, both the Great Inflation episode and the subsequent Volcker disinflation are characterized by a significantly larger negative correlation between the reduced-form innovations to vacancies and the unemployment rate than the rest of the sample period. Those years also exhibit a greater cross-spectral coherence between the two series at business-cycle frequencies. This suggests that they are driven by common shocks.
AUTHORS: Lubik, Thomas A.; Benati, Luca
DATE: 2013

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