This paper addresses empirically the issues of selecting the appropriate opportunity cost variables in the money demand function in the presence of alternative non-nested hypothesis. Adopting a conventional real partial adjustment hypothesis, the relative performance of two alternative competing specifications for the demand for narrowly defined money with domestic and foreign short-term deposits rates as alternative measures of the opportunity cost of holding money balances is compared utilizing formal significance tests of model specification in the presence of alternative non-nested hypothesis. The tests are carried out with quarterly data from the small open economy of Kuwait over the period 1983-90. The tests unequivocally discriminated in favor of a foreign interest rate specification. A brief discussion of the factors explaining our results is presented.
Elsamadisy, E. (1993). Testing Non-Nested Specifications of Money Demand for The Small Open Economy of Kuwait. The Egyptian Statistical Journal, 37(2), 275-294. doi: 10.21608/esju.1993.314844
MLA
Elsayed M. Elsamadisy. "Testing Non-Nested Specifications of Money Demand for The Small Open Economy of Kuwait", The Egyptian Statistical Journal, 37, 2, 1993, 275-294. doi: 10.21608/esju.1993.314844
HARVARD
Elsamadisy, E. (1993). 'Testing Non-Nested Specifications of Money Demand for The Small Open Economy of Kuwait', The Egyptian Statistical Journal, 37(2), pp. 275-294. doi: 10.21608/esju.1993.314844
VANCOUVER
Elsamadisy, E. Testing Non-Nested Specifications of Money Demand for The Small Open Economy of Kuwait. The Egyptian Statistical Journal, 1993; 37(2): 275-294. doi: 10.21608/esju.1993.314844
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