Munich Personal RePEc Archive

stability of money demand function in Tunisia

mhamdi, ghrissi (2013): stability of money demand function in Tunisia. Published in: Journal of Contemporary Research In Business , Vol. 5, No. 6 (18 October 2013)


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The aim of this paper is to give an answer to the question that remains wide open; Is Central Bank of Tunisia, capable to transmit all the information on the evolution of prices to economic agents through targeting monetary aggregates. To answer this question, a way that focuses on the stability of the money demand function through the test of Cumulative Sum of residues (SUMCU) and Chow's Forecast test is followed. The results of this study indicate that there is no significant and important relationship between money and prices either in short term or long term. In addition, by estimating the money demand function and its long-term stability, the results show that this relationship is not stable in the case of the Tunisian economy.

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