Singh, Rup and Kumar, Saten (2007): Application of the Alternative Techniques to Estimate Demand for Money in Developing Countries.
Download (317Kb) | Preview
In this paper, we applied alternative time series techniques and obtained similar summaries of demand for money relations for twelve developing countries. This indicates that adequate attention should be paid to the purpose of research and interpretation of results rather than to econometric techniques. We also find that income elasticities are close to unity for almost all of our sample countries and the interest rate elasticities are well determined and significant. Further, it is shown that demand for money in these countries is temporally stable and therefore the respective monetary authorities may target money supply as opposed to the rate of interest.
|Item Type:||MPRA Paper|
|Original Title:||Application of the Alternative Techniques to Estimate Demand for Money in Developing Countries|
|English Title:||Application of the Alternative Techniques to Estimate Demand for Money in Developing Countries|
|Keywords:||Demand for money; Cointegration; Monetary policy|
|Subjects:||C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E41 - Demand for Money
|Depositing User:||Saten Kumar|
|Date Deposited:||15. Dec 2009 07:36|
|Last Modified:||17. Feb 2013 18:54|
Anglingkusumo, R. (2005) “Stability of the demand for real narrow money in Indonesia,” Tinbergen Institute Discussion Paper TI 2005-051/4 (Jakarta: Tinbergen Institute).
Atkins, F. (2005) “Financial crises and money demand in Jamaica,” Birkbeck working papers in Economics and Finance No. 0512 (London: University of London).
Bai, J. and Perron, P. (2003) “Computation and analysis of multiple structural change models,” Journal of Applied Econometrics, 18: 1-22.
Bahmani-Oskooee, M. and Rehman, H. (2002) “Stability of the money demand function in Asian developing countries,” Applied Economics, 37: 773-792.
Bynoe, A.J. (2002) “Economic liberalization and money demand stability in Jamaica,” International Advances in Economic Research, 8: 362.
Charmza, W. and Deadman, D. (1997) New Directions in Econometric Practice, 2nd Edition. Cheltonham: Edward Elgar.
Das, S. And Mandal, K. (2000) “Modeling money demand in India: testing weak, strong and super exogeneity,” Indian Economic Review, 35: 1-19.
Davidson, J., Hendry, D., Srba, F., and Yeo, S. (1978) “Econometric modeling of the aggregate time-series relationship between consumers' expenditure and income in the United Kingdom,” The Economic Journal, 88: 661-692.
Dekle, R. and Pradhan, M. (1997) “Financial liberalization and money demand in ASEAN countries: implications for monetary policy,” IMF Working Paper 97/36 (Washington: International Monetary Fund).
Enders, W. (2004) Applied Econometric Time Series, 2nd edition, (Hoboken NJ: John Wiley).
Ericsson, N. and MacKinnon, J. (2002) “Distributions of error correction tests for cointegration,” Econometrics Journal, 5: 285-318.
Friedman, M. and Schwartz, A. (1991) “Alternative approaches to analyzing economic data,” American Economic Review, 81: 39-49.
Ghartey, E.E. (1998) “Money demand in Jamaica: evidence from cointegration, error correction modelling, and exogeneity,” North American Journal of Economics and Finance, 9: 33-43.
Gregory, A.W. and Hansen, B.E. (1992) “Residual-based tests for cointegration in models with regime shifts,” RCER Working Papers 335 (University of Rochester - Center for Economic Research).
Hafer, R. and Kutan, A. (2003) “Financial innovation and the demand for money: Evidence from the Philippines,” International Economic Journal, 81: 17-27.
International Financial Statistics, December, 2003/5. IMF CD-ROM (Washington DC: International Monetary Fund).
James, G.A. (2005) “Money demand and financial liberalization in Indonesia,” Journal of Asian Economics, 16: 817-829.
Jayaraman, T.K. and Ward, B.D. (2000) “Demand for money in Fiji: An econometric analysis,” Pacific Economic Bulletin, 15: 81-93.
Katafono, R. (2001) “Demand for money in Fiji,” Staff Working paper 03/2001 (Suva: The Reserve Bank of Fiji). McNelis, P.D. (1998) “Money demand, financial distress, and exchange-rate uncertainty in Indonesia,” available at http://citeseer.ist.psu.edu/278858.html.
Moosa, I. A. (1992) “The demand for money in India: a cointegration approach,” Indian Economic Journal, 40: 101–15.
Narayan, P.K. (2007) “Is money targeting an option for Bank Indonesia?,” Journal of Asian Economics, 18: 726-738.
Oskooee, M. and Rehman, H. (2005) “Stability of the money demand function in Asian developing countries,” Applied Economics, 37: 773-792.
Pesaran, M., and Pesaran, B. (1997) Working with Microfit 4.0. Oxford: Oxford University Press.
Poole, W. (1970) “The optimal choice of monetary policy instruments in a simple macro model,” Quarterly Journal of Economics, 84:197-216.
Pradhan, B. and Subaramanian, A. (2003) “On the stability of the demand for money in a developing economy: Some empirical issues,” Journal of Development Economics, 72: 335-351.
Price, S. and Insukindro (1994) “The demand for Indonesian narrow money: long-run equilibrium, error correction and forward-looking behaviour,” Journal of InternationalTrade and Economic Development, 3: 147–63.
Ramachandran, M. (2004) “Do broad money, output, and prices stand for a stable relationship in India?,” Journal of Policy Modeling, 26: 983-1001.
Rao, B. B. (2006) “Estimating short and long run relationships: A guide to applied economists,” forthcoming in Applied Economics.
Rao, B.B and Kumar, S (2007) “Structural breaks, demand for money and Monetary policy in Fiji,” Pacific Economic Bulletin, 22: 54-62.
Rao, B.B. and Shalabh (1995) “Unit roots cointegration and the demand for money in India,” Applied Economics Letters, 2: 397-399.
Rao, B. and Singh (2005a) “Cointegration and error correction approach to the demand for money in Fiji,” Pacific Economic Bulletin, 20: 72-86.
----------------------- (2005b) “Demand for money in Fiji with PcGets,” Applied Economics Letters, forthcoming.
----------------------- (2005c) “Demand for money in India: 1953-2003,” Applied Economics, 38: 1319-1326.
Smith, R. (2000) “Unit roots and all that: The impact of times series methods on macroeconomics,” in Backhouse, R. and Salanti, A. (eds). Macroeconomics and the Real World, Oxford: Oxford University Press.
Sriram, S. S. (1999) “Survey of literature on demand for money: Theoretical and empirical work with special reference to error-correction models,” IMF Working Paper 7WP/99/64 (Washington DC: International Monetary Fund).
Sumner, M. (2008) “Demand for money in Thailand”, forthcoming in Applied Economics.
The Asian Development Bank, (2005) “Fiji's economic and financial Update - 2005,” Key Indicators of Developing Asia and Pacific Countries. Manilla: The Asian Development Bank.
Valadkhani, A. and Alauddin, M. (2003) “Demand for M2 in developing countries: an empirical panel investigation,” School of Economics and Finance Discussion Paper No. 149 (Queensland: Queensland University of Technology).