Revisiting Money Demand Function for GCC Countries and Testing its Stability

Mahmood, Haider (2016): Revisiting Money Demand Function for GCC Countries and Testing its Stability. Published in: Journal of Economics and Economic Education Research, 17(2), 137-147. , Vol. 17, No. 2 (5 August 2016): pp. 137-147.

Abstract

A money demand’s stability is necessary condition in choosing the appropriate monetary policy. The present study has investigated the most important determinants of money demand by using a period of 1980-2014 for a panel of Gulf Cooperation Council (GCC) countries and has also tested its stability. A unit root analysis has confirmed the mix order of integration. In the long run relationships, income and exchange rate have positive influences on money demand and inflation and interest rates are showing the negative influences. In the short run analysis, income is observed as sole determinant of money demand. Further, estimated model holds stability. Therefore, the present study suggests money supply as a policy instrument.

• Item Type: MPRA Paper
• Language: English
• Keywords: Key Words: Money Demand, Monetary Policy, Cointegration, Stability
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates

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