Monetary policy uncertainties and demand for money for Greece: Nonlinear ARDL approach
Siyuqi He
Co-Presenters: Individual Presentation
College: College of Business and Public Management
Major: Economics
Faculty Research Mentor: Nazif Durmaz
Abstract:
This study examines the impact of monetary policy uncertainty on Japanese money demand. Given that the Japanese have high uncertainty aversion, we use the newly developed Monetary Policy Uncertainty (MPU) index. By applying linear and nonlinear autoregressive distributed lag (ARDL) models, we aim to understand the complex relationships between these factors.The nonlinear ARDL model's findings demonstrate that changes in monetary policy uncertainty severely harm Japanese money demand. In particular, Japanese demand for money rises as monetary policy uncertainty decreases and vice versa. Furthermore, less uncertainty is more substantial than significant ambiguity, indicating that the Japanese are more sensitive to less uncertainty in monetary policy about money demand. Linear models do not find such a link.Our conclusion is twofold. First, monetary policy uncertainty does affect Japanese demand for money, suggesting that the Japanese may be reclassified as monetary policy uncertainty averse. Secondly, the nonlinear ARDL model can reveal the hidden relationship between variables the linear model ignores. Given the increasing uncertainty in the global market, which leads to serious information asymmetry problems, nonlinear method techniques should be prioritized and used in relevant empirical research.