Successful replication of the article: buffer-stock money: interpreting short-run dynamics using long-run restrictions.
McCullough, B.D. ; Myers, Bret R.
In the May 1996 issue of The Journal of Money, Credit, and Banking,
Ross Milbourne and Glenn Otto comment on an earlier article by W.D
Lastrapes and G. Selgin entitled "Buffer-Stock Money: Interpreting
Short-Run Dynamics Using Long-Run Restrictions which appeared in a the
February 1994 issue of the same journal. Lastrapes and Selgin had tested
the buffer-stock hypothesis that increases in the money supply
engineered by the monetary authorities remain in individuals' bank
accounts instead of triggering portfolio substitutions. Milbourne and
Otto raise questions of Lastrapes and Selgin's bivariate vector
auto-regression system in testing the buffer-stock hypothesis. Milbourne
and Otto analyze data taken from the International Financial Statistics
(IFS) CD-ROM database for December 1992 and present their results in the
form of two graphs showing the response of real and nominal currency to
a both a real shock and nominal shock, and also a table containing
variance decompositions for real currency and nominal currency.
The statistical and graphical analysis performed in this paper was
executed using RATS software version 4.02. The relevant data files are
located in the JMCB archive. In an initial attempt to replicate the
Milbourne and Otto analysis using a more current version of RATS 6.20,
there was a small error in that the data file name was in upper case. In
order to replicate without error, the data file name needed to be in
lower case. After this change, all the output matched up identically to
the output posted by Milbourne and Otto. Thus, the analysis performed by
Milbourne and Otto is validated by this successful replication.
REFERENCES
Lastrapes, W.D. and G. Selgin (1994), "Buffer Stock Money:
interpreting short-run dynamics using long-run restrictions,"
Journal of Money, Credit and Banking, 26: 34-54.
Milbourne, R. and G. Otto (1996). "Buffer Stock Money:
Interpreting Short-Run Dynamics Using Long-Run Restrictions: A
Comment," Journal of Money, Credit and Banking,. 28, 2: 272-278.
B. D. MCCULLOUGH & BRET R. MYERS
Drexel University
