Randall P. Mariger, Kathryn Shaw, Unanticipated Aggregate Disturbances and Tests of the Life-Cycle Consumption Model Using Panel Data, The Review of Economics and Statistics, Vol. 75, No. 1 (Feb., 1993), pp. 48-56

This Monte Carlo study compares the performance of a recently proposed multiprocess mixture model and a more traditional random walk time-varying parameter model in the face of structural shifts and outliers. The mixture model performs well and the latter model performs poorly. This finding is of general interest since investigators often adopt random-walk time-varying parameter models to accommodate potential regime shifts in regression relationships. The findings suggest that the time-varying parameter estimation procedure is unlikely to find abrupt shifts, since the time-varying parameter estimates are contaminated by the outliers and regime shifts.

In this paper, the author obtains and interprets estimates of short- and long-run demand for money in the United King dom in the period 1871-1913 utilizing high-quality data on broad money and its determinants and applying recent econometric techniques. A unique, theoretically consistent long-run function is estimated as well as a short-run dynamic demand function that is formally superio r to a number of previous estimates.

This paper examines the demand for money under conditions of very high inflation in Argentina, Bolivia, Brazil, Chi le, and Peru during the 1970s and 1980s. The authors test whether the monetary and inflationary experiences of these countries can be adequately characterized by the Cagan (1956) model, using an econometric procedure that is not reliant on any particular assumpti on concerning expectations formation except that forecasting errors are stationary. The authors also examine the importance of foreign asset substitution in domestic portfolios and the hypothesis that monetary policy was tantamount to maximization of the inflation tax revenue before testing the rational expectations hypothesis.