Abstract
We analyze a money demand function in long equilibrium relation that is defined by a cointegration property among (money, gdp, interest rate). A wide sense of money ”M2 ＋ CD” consists of narrow money ”M1” and wide one ”quasi currency ＋ CD”. Preceding researchers considered the relationship of (M1, gdp, call rate), (M2 ＋ CD, gdp, call rate) and (M2 ＋ CD, gdp, spread interest rate), where call rate is a representative short-term interest rate and where spread is a difference between long-term interest rate and short-term one. It is obvious that M1 should be coupled with short-term interest rate. We showed that quasi currency ＋ CD (denoted by q-money) should be considered by spread interest rate, and hence, rigorously speaking, M2 ＋ CD should be coupled with two kinds of interest rates, i.e., short-term interest rate and spread one.
