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Money demand, the Cagan model, testing rational expectations vs adaptive expectations: The case of Turkey

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Abstract.

This paper estimates the Cagan type demand for money function for Turkish economy during the period 1986:1–1995:3 and tests whether Cagan's specification fits the Turkish data using an econometric technique assuming that forecasting errors are stationary. This paper also tests the hypothesis that monetary policy was implemented in aiming to maximize the inflation tax revenue. Finally, the Cagan model is estimated with the additional assumption of rational expectations for Turkey for the considered period.

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Authors and Affiliations

  1. Department of Economics, Bilkent University, 06533 Ankara, Turkey (e-mail: kivilcim@bilkent.edu.tr), , , , , , TR

    Kivilcim Metin & Ilker Muslu

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  1. Kivilcim Metin
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  2. Ilker Muslu
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First version received: March 1998/final version received: October 1998

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Metin, K., Muslu, I. Money demand, the Cagan model, testing rational expectations vs adaptive expectations: The case of Turkey. Empirical Economics 24, 415–426 (1999). https://doi.org/10.1007/s001810050064

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  • DOI: https://doi.org/10.1007/s001810050064

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