For a selected country and using quarterly data, specify and estimate the money supply function. Among your independent variables, include at least two different interest rates, one being the discount/Bank rate and the other a market-determined short-term rate.

Check and correct for shifts in the money supply function during the period of your study. Carry out your estimations using the following techniques:

(a) least-squares estimation, with a first-order PAM;

(b) cointegration with an error-correction model.

Discuss your choice of the functional form of the money supply function and your choice of the variables and econometric techniques used, as well as the data and econometric problems you encountered.

Discuss your results, their plausibility and consistency with the theory, and their robustness. Can you explain the estimated shifts in your function by reference to changes in the policies of the central bank?