Stephen M. Miller Splitting the sample in 1973 and testing for structural changes in money demand has become standard procedure. This suggests equations for the testing for structural shifts. Such a procedure is problematic be cause the standard errors from the cointegration regressions are ing the cointegration equation for the 1959 i to 1973: u and 1974: to 1987: iv periods. i also report the full-sample results from Table 2 to facilitate comparisons everal observations emerge. First, neither of the sub-sample regressions pass the dF or the aDF tests for stationary errors, sug- gesting non-cointegration. The Df and ADF statistics are in the neighborhood of the 10% significance level, however. Furthermore visual inspection of the autocorrelation and partial autocorrelation functions suggest stationary error structures; the auto-correlation declines quickly while the partial autocorrelation functions have spikes (of around 0.65)at lag one only. Second, the price and interest rate elasticities increase in the latter period. Numerous authors argue that the interest rate elasticity increased because of financial in d deregulation. Finally, the real income elasticity falls in the latter period Error-Correction Modeling The final stage in the model building process involves the con truction of error-correction models. The standard procedure in TABLE 4. Cointegration Regressions: Sub-Samples Coefficients of CONST In y In P In re R DW DF ADF 1959i-1987:iU lnM2-6.351.2040.952-0.0920.990.53-4.21**-4.22* 1959i1973:i lnM2-6.5612650.876-0.0790.990.74-3.63 1974:i-1987;it lnM2-5221.0111.054-0.1040.990.57-3.53 NOTES: See Table 2. For the ADf test, lagged first-differences of the er *significant at the 5% level **significant at the 10% levelStephen M. Miller Splitting the sample in 1973 and testing for structural changes in money demand has become standard procedure. This suggests estimating cointegration equations for the two sub-samples, and testing for structural shifts. Such a procedure is problematic be￾cause the standard errors from the cointegration regressions are misleading. Nonetheless, Table 4 does report results from estimat￾ing the cointegration equation for the 1959:i to 1973:iu and 1974:i to 1987:iu periods. I also report the full-sample results from Table 2 to facilitate comparisons. Several observations emerge. First, neither of the sub-sample regressions pass the DF or the ADF tests for stationary errors, sug￾gesting non-cointegration. The DF and ADF statistics are in the neighborhood of the 10% significance level, however. Furthermore, visual inspection of the autocorrelation and partial autocorrelation functions suggest stationary error structures; the auto-correlation declines quickly while the partial autocorrelation functions have spikes (of around 0.65) at lag one only. Second, the price and interest rate elasticities increase in the latter period. Numerous authors argue that the interest rate elasticity increased because of financial in￾novation and deregulation. Finally, the real income elasticity falls in the latter period. Error-Correction Modeling The final stage in the model building process involves the con￾struction of error-correction models. The standard procedure in￾TABLE 4. Cointegration Regressions: Sub-Samples Coefficients of CONST In y ln P In r, R2 DW DF ADF 1959:i-1987:iu In M2 -6.35 1.204 0.952 -0.092 0.99 0.53 -4.21** -4.22* 1959:i-1973:iu In M2 -6.56 1.265 0.876 -0.079 0.99 0.74 -3.63 -3.35 1974:i-1987:iu In M2 -5.22 1.011 1.054 -0.104 0.99 0.57 -3.53 -3.58 NOTES: See Table 2. For the ADF test, lagged first-differences of the error term are included only if significant. *significant at the 5% level. **significant at the 10% level