. . . .

. . . .

75 2298 0.95588 0.47239

. . . .

. . . .

. . . .

458 3999 0.98961 0.94792

STFnber96.xpl

For example, DMU 2013 had inputs X1 = 88.1, X2 = 14925, X3 = 250,

X4 = 4365.1, and output Y = 5954.2 with input e¬ciency 0.64321 and with

output e¬ciency 0.70255. Then the e¬cient level of input for this ¬rm is given

by X1 = 56.667, X2 = 9600, X3 = 160.8, and X4 = 2807.7. And in the aspect

of output e¬ciency this ¬rm should have increased their output by Y = 4183.1

with the observed level of inputs to be considered as output technically e¬cient.

100 5 Nonparametric Productivity Analysis

Bibliography

Charnes, A., Cooper, W. W, and Rhodes, E. (1978). Measuring the Ine¬ciency

of Decision Making Units, European Journal of Operational Research 2,

429“444.

Deprins, D., Simar, L. and Tulkens, H. (1984). Measuring Labor Ine¬ciency

in Post O¬ces, in The Performance of Public Enterprizes: Concepts and

Measurements, 243“267.

F¨re, R., Grosskopf, S. and Lovell, C. A. K. (1985). The Measurement of

a

E¬ciency of Production, Kluwer-Nijho¬.

F¨re, R., Grosskopf, S. and Lovell, C. A. K. (1994). Production Frontiers,

a

Cambridge University Press.

Farrell, M. J. (1957). The Measurement of Productivity E¬ciency, Journal of

the Royal Statistical Society, Ser. A 120, 253“281.

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of Monotone and Concave Frontier Functions, Journal of the American

Statistical Association 94, 220“228.

Jeong, S. and Park, B. U. (2002). Limit Distributions Convex Hull Estimators

of Boundaries, submitted.

Kneip, A., Park, B. U. and Simar, L. (1998). A Note on the Convergence of

Nonparametric DEA E¬ciency Measures, Econometric Theory 14, 783“

793.

Park, B. U. (2001). On Nonparametric Estimation of Data Edges, Journal of

the Korean Statistical Society 30, 2, 265“280.

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ductivity E¬ciency Scores : Asymptotic Properties, Econometric Theory

16, 855“877.

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Scheel, H. (1999). Continuity of the BCC e¬ciency measure, in: Westermann

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e

Belgium.

6 Money Demand Modelling

Noer Azam Achsani, Oliver Holtem¨ller and Hizir Sofyan

o

6.1 Introduction

Money demand is one of the most important indicators for the monetary situ-

ation in a country. The relationship between money balances and their deter-

minants has been studied extensively. From the previous researches, there is

an overall agreement on the view that the knowledge of the demand for money

function is important for the formulation of an appropriate monetary policy.

In this paper, we explore the M2 money demand function for Indonesia in the

more recent period 1990:I - 2002:III. This period is dominated by the Asian

crises, which started in 1997. In the aftermath of the crisis, a number of

immense ¬nancial and economic problems have emerged in Indonesia. The

state has deteriorated, and in¬‚ation rates have risen in the middle of 1997

until the middle of 1998. The price level increased by about 16 percent in

1997 compared to the previous year. In the same period, the call money rate

increased temporarily from 12.85 percent to 57.10 percent and the money stock

increased by about 54 percent. The economy contracted as re¬‚ected by the

decrease in the GNP of about 11 percent. Given these extraordinary economic

developments, it may not be expected that a stable money demand function

existed during that period.

This research is at least important in two di¬erent respects. Firstly, it ex-

plores money demand using data of Indonesia, a very dynamic but relatively

unexplored country. Secondly, we employ not only standard econometric model

(which are normally used in money demand), but also a relatively new approach

in economics analysis, so called fuzzy Takagi-Sugeno model.

The fuzzy model can be used to explain the underlying structure of the systems.

In the real world, it is almost impossible to ¬nd a perfect situation in which

104 6 Money Demand Modelling

all variables are available and countable. There are always some unpredictable

factors which in¬‚uence the system. The use of fuzzy Takagi-Sugeno model as

an alternative may give us a complementary solution to the common one.

The rest of the paper is organized as follows. In the Section 2 we introduce

the money demand function and estimate the model. Section 3 performs the

fuzzy approach and its application to money demand. Last section presents

the conclusions of this research.

6.2 Money Demand

6.2.1 General Remarks and Literature

Major central banks stress the importance of money growth analysis and of

stable money demand function for monetary policy purposes. The Deutsche

Bundesbank, for example, has followed an explicit monetary targeting strat-

egy from 1975 to 1998, and the analysis of monetary aggregates is one of the

two pillars of the European Central Bank™s (ECB) monetary policy strategy.

Details about these central banks™ monetary policy strategies, a comparison

and further references can be found in Holtem¨ller (2002). The research on

o

the existence and stability of a money demand function is motivated inter alia

by the following two observations: (i) Money growth is highly correlated with

in¬‚ation, see McCandless and Weber (1995) for international empirical evi-

dence. Therefore, monetary policy makers use money growth as one indicator

for future risks to price stability. The information content of monetary aggre-

gates for future in¬‚ation assessment is based on a stable relationship between

money, prices and other observable macroeconomic variables. This relation-

ship is usually analyzed in money demand studies. (ii) The monetary policy

transmission process is still a “black box”, see Mishkin (1995) and Bernanke

and Gertler (1995). If we are able to specify a stable money demand function,

an important element of the monetary transmission mechanism is revealed and

may help to learn more about monetary policy transmission.

A huge literature exists about the analysis of money demand. The major-

ity of the studies is concerned with industrial countries. Examples are Hafer

and Jansen (1991), Miller (1991), McNown and Wallace (1992) and Mehra

(1993) for the USA; L¨tkepohl and Wolters (1999), Coenen and Vega (1999),

u

Brand and Cassola (2000) and Holtem¨ller (2004) for the Euro area; Arize and

o

Shwi¬ (1993), Miyao (1996) and Bahmani-Oskooee (2001) for Japan; Drake

6.2 Money Demand 105

and Chrystal (1994) for the UK; Haug and Lucas (1996) for Canada; Lim

(1993) for Australia and Orden and Fisher (1993) for New Zealand.

There is also a growing number of studies analyzing money demand in develop-

ing and emerging countries, primarily triggered by the concern among central

bankers and researchers around the world about the impact of moving toward

¬‚exible exchange rate regimes, globalization of capital markets, ongoing ¬nan-

cial liberalization, innovation in domestic markets, and the country-speci¬c

events on the demand for money (Sriram, 1999). Examples are Hafer and Ku-

tan (1994) and Tseng et. al (1994) for China; Moosa (1992) for India; Arize

(1994) for Singapore and Deckle and Pradhan (1997) for ASEAN countries.