Stock adjustment models of money demand have employed either the nominal or real adjustment process, but they have not been tested statistically due to their nonnested- ness. This paper formulates a general stock adjustment model which includes both nominal and real adjustment processes as its nested subsets. Each process is then tested against the general specification. The paper also examines the homogeneity of money demand with respect to price level and income in the general model.

Fabo et al. (2021) use OLS regression to show that central bankers report quantitatively larger effects of QE on output and inflation than do academic researchers. We reject the null hypothesis of a Gaussian distribution of the residuals in many of these specifications, except for the language regressions. We then repeat the analysis with regression estimators that are robust to a non-Gaussian residual distribution where this is feasible. We use the median regression and the MS regression estimator. With these robust regression approaches, the null hypothesis that central bank and academic researchers report the same quantitative effect of QE on output and inflation cannot be rejected, with point estimates which are less than half as large. This statistical challenge suggests that more research is required to understand better whether central bank researchers report different QE multipliers or not.

An econometric methodology is proposed for reconciling inaccurate measures of latent data which are subject to accounting constraints. The method deals with the case in which the measurement errors are serially correlated, generalizing previous contributions. A class of efficient estimators are derived for the latent data. Consistent estimators for the weight matrices applied to the observed information based on a linear regression procedure are obtained together with confidence interval estimators for these weight matrices. Approximate confidence intervals are suggested for the latent data themselves together with specification tests for the assumptions underlying the procedure. An application of the proposed method is made to U.K. Gross Domestic Product in constant prices for 1958Q1–1989Q4.