IN A RECENT PAPER Cargill and Meyer [1] use Monte Carlo simulations to examine the behavior of some distributed lag estimators when the lag structure is misspecified. The authors hold that it is not easy to compare the Almon polynomial lag method and OLS analytically if the restrictions imposed by the Almon procedure are not correct. It is our intention to derive analytical expressions for the bias in the Almon estimator. We postulate a linear distributed lag model

Timo Terasvirta of Aarhus University reviews, “Dynamic Models for Volatility and Heavy Tails: With Applications to Financial and Economic Time Series” by Andrew C. Harvey. The Econlit abstract of this book begins: “Presents a theory for a class of nonlinear time series models that can deal with dynamic distributions, with an emphasis on models in which the conditional distribution of an observation may be heavy-tailed and the location and/or scale changes over time. Discusses statistical distributions and asymptotic theory; location; scale; location/scale models for nonnegative variables; dynamic kernel density estimation and time-varying quantiles; multivariate models, correlation, and association; and further directions in dynamic models. Harvey is Professor of Econometrics at the University of Cambridge and Fellow of Corpus Christi College, the Econometric Society, and the British Academy.”

An error correction model for the demand for real M3 money is constructed for the period of 1976–1994 with real GNP, the GNP deflator, as well as a short-term and a long-term interest rate as explanatory variables. Quarterly, seasonally unadjusted data are used in estimating the model. It is found that there is a clear structural break due to the German unification in 1990. On the other hand, once this structural break is accounted for, a stable relation is found which resists a series of specification tests. These include a number of recent tests of parameter constancy and linearity. Our specification is at variance with findings reported by some other researchers, notably the Deutsche Bundesbank.