ECONOMIC UNCERTAINTY, MONETARY UNCERTAINTY, AND THE DEMAND FOR MONEY IN AFRICA: AN ASYMMETRY ANALYSIS

2020 ◽  
Vol 20 (02) ◽  
pp. 2050007
Author(s):  
MOHSEN BAHMANI-OSKOOEE ◽  
AUGUSTINE C. ARIZE
Keyword(s):  
Money Demand ◽  
Region Of Interest ◽  
Output Volatility ◽  
Economic Uncertainty ◽  
Demand For Money ◽  
Asymmetric Effects ◽  
Nonlinear Ardl ◽  
Uncertainty Measures ◽  
Long Run ◽  
Short Run

Economic uncertainty and monetary uncertainty are two uncertainty measures that are said to affect the demand for money in any country and our region of interest, Africa, is no exception. In this paper, we take an additional step and argue that changes in any uncertainty measure could have asymmetric effects on the money demand. After applying the linear and nonlinear ARDL approaches to each of the 13 African nations, while we find the short-run effects of both uncertainty measures to be asymmetric, long-run asymmetric effects were discovered in limited number of countries. We also discovered that monetary volatility has more long-run effects than output volatility which implies that a steady and not so erratic money growth will have its predictive impact on the African economies.

scholarly journals Asymmetric Effects of Exchange Rate on Monetary Policy in Emerging Countries: A Non-Linear ARDL Approach in Uganda

2020 ◽  
Vol 7 (5) ◽  
pp. 24
Author(s):  
Allan Kayongo ◽  
Asumani Guloba ◽  
Joseph Muvawala
Keyword(s):  
Exchange Rate ◽  
Money Demand ◽  
Economic Uncertainty ◽  
Ardl Model ◽  
Real Money ◽  
Asymmetric Effects ◽  
Long Run ◽  
Non Linear ◽  
Short Run ◽  
Exchange Rate Depreciation

Many money demand studies have been carried out on Uganda, however, these studies perceive and incorporate exchange rate as a linear determinant of real money demand. Indeed, exchange rate may have asymmetric effects on real money demand; with exchange rate appreciation having different effects from exchange rate depreciation. Therefore, this is the first study to estimate exchange rate asymmetries in Uganda, for the period 2008Q3 and 2018Q4. The study uses both the linear ARDL and non-linear ARDL methodologies to accomplish its goal. This is also done by incorporating an economic uncertainty index, which is critical, especially in light of the novel global coronavirus pandemic, that has disrupted trade, movement and supply chains. The error correction terms of both models are negative and significant, with the one of the non-linear ARDL twice as much as that of the linear ARDL. Indeed, the study confirms the existence of exchange rate asymmetries on Uganda’s real money demand. In the linear ARDL model, exchange rate has a positive effect in the long run but a negative result in the short run. On one hand, the non-linear ARDL model reveals that an exchange rate depreciation of the Uganda Shillings negatively affects real money demand in the short run. On the other hand, an exchange rate appreciation positively effects real money demand. Notably, economic uncertainty has insignificant effects in both models, except for its lags in the non-linear model. The implication of these findings is that macro-economic policy management in Uganda should be cognizant of these asymmetric effects of exchange rate, for effective planning, policy and implementation.

scholarly journals Do Exchange Rate Changes Have Asymmetric or Symmetric Effects on the Demand for Money in the Gambia

2019 ◽  
Vol 9 (4) ◽  
pp. 276
Author(s):  
Kebba Bah ◽  
Karamat Khan ◽  
Artif Taufiq Nurrachman Aziez ◽  
Ali Kishwar
Keyword(s):  
Exchange Rate ◽  
The Gambia ◽  
Demand For Money ◽  
Asymmetric Effects ◽  
On Demand ◽  
Nonlinear Ardl ◽  
Long Run ◽  
Short Run ◽  
Exchange Rate Changes ◽  
The Relationship

In trying to explain the relationship between exchange rate and demand for money researchers have applied different models. In this paper, we applied both the linear and nonlinear ARDL to check the effects of exchange rate changes on the demand for money (M1 and M2) in The Gambia. The result revealed that the demand for money is cointegrated with its determinants and have a stable short-run relationship. It also revealed that exchange rate changes have only short-run asymmetric effects on demand for money (M1 or M2) but don’t have long-run effects.

Policy Uncertainty and the Demand for Money in Canada: A Nonlinear Approach

2018 ◽  
Vol 64 (4) ◽  
pp. 279-295 ◽  
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Majid Maki Nayeri
Keyword(s):  
Money Demand ◽  
Policy Uncertainty ◽  
Demand For Money ◽  
The Public ◽  
Nonlinear Ardl ◽  
Nonlinear Approach ◽  
Long Run ◽  
Clear Sign ◽  
Negative Effect ◽  
Short Run

Abstract Economic uncertainty is said to affect the demand for money in either direction. We use the new comprehensive measure of policy uncertainty and assess its impact on the demand for money in Canada. When a linear model was used, we found only short-run effects of uncertainty on Canadian cash holdings. However, when a nonlinear model was used, the results revealed that increased policy uncertainty has negative effect on the demand for money in the long run but decreased uncertainty has no effect, a clear sign of an asymmetric response by the public. JEL classifications: E41 Keywords: Canada, Money Demand, Policy Uncertainty, Asymmetry, Nonlinear ARDL

scholarly journals Money Demand Function for Nepal: An Empirical View from Expenditure Component

2019 ◽  
pp. 12-25
Author(s):  
Pujan Adhikari
Keyword(s):  
Interest Rate ◽  
Money Demand ◽  
Capital Formation ◽  
Consumption Expenditure ◽  
Demand For Money ◽  
Final Consumption ◽  
On Demand ◽  
Long Run ◽  
Fixed Capital Formation ◽  
Short Run

This paper examines the long run and short-run dynamics relationship between broad money, consumption expenditure, capital stock and interest rate in Nepal over the period of 1975-2017. This paper employs ARDL bound testing approach for co-integration between the broad money demand and its determinants. Result reveals the evidence of cointegration among the variables. The empirical results show that the demand for money is affected by the interest rate and final consumption expenditure both in the long run and short-run. However, the gross fixed capital formation has no impact on demand for money in the long-run and short-run as well. On contrast, interest rate is positively associated with Broad money demand, which is not consistent with theoretically. Positive association of money demand with interest rate shows that demand for money function is instability in Nepal. Thus, this study suggests that policy maker to correct price fluctuation through the control of various expenditure components, particularly, real final consumption expenditure might be an important strategy in the long run. However, the gross fixed capital formation has no impact on demand for money in the long-run.

scholarly journals META-ANALYSIS OF MONEY DEMAND IN INDONESIA

2012 ◽  
Vol 15 (1) ◽  
pp. 41-62
Author(s):  
Galih Riyandi
Keyword(s):  
Money Demand ◽  
Opportunity Cost ◽  
Fixed Effects ◽  
Income Elasticity ◽  
Meta Analysis ◽  
Demand For Money ◽  
Cost Elasticity ◽  
Classification Code ◽  
Long Run ◽  
Short Run

Theory and empirical study about demand for money is the key feature in macroeconomics theory. The study about demand for money in Indonesia has been developing with various techniques. Its result in various analyses can be difficult in understanding behaviour of demand for money in Indonesia. This paper aims to find out the tendency of demand for money in Indonesia by analyzing long run and short run income elasticity and opportunity cost elasticity. We use fixed effects meta-analysis and unweighted average meta-analysis. The result shows that income elasticity and opportunity cost elasticity are consistent with theory of money demand. That result can be used as an empirical foundation to future study about demand for money in Indonesia.  Keywords: demand for money, meta analysis, fixed effects.JEL Classification code: E41, E52

scholarly journals Do Exchange Rate Changes have Symmetric or Asymmetric Effects on the Demand for Money in Korea?

2017 ◽  
Vol 9 (2) ◽  
pp. 155-168
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Jungho Baek
Keyword(s):  
Exchange Rate ◽  
Wealth Effects ◽  
Adjustment Process ◽  
Negative Effects ◽  
Demand For Money ◽  
Asymmetric Effects ◽  
Nonlinear Ardl ◽  
Long Run ◽  
The Exchange Rate ◽  
Exchange Rate Changes

Previous studies that included the exchange rate in the Korean demand for money assumed that the effects of the exchange rate changes are symmetric and adjustment process is linear. They found no significant effects. In this paper we apply Shin et al.’s (2014) Nonlinear ARDL approach to cointegration and error-correction modeling and test the symmetric versus asymmetric effects of exchange rate changes on the demand for money in Korea. Using quarterly data over the period 1973-2014, the results show that indeed the effects are asymmetric in the short run. In the long run, however, although the effects are symmetric but both won depreciation and won appreciation have significantly negative effects on the demand for money, supporting the wealth effects argument.

The Asymmetric Effects of Exchange Rate Changes on the Trade Balance of Singapore

2017 ◽  
Vol 17 (4) ◽  
pp. 20170055
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Hanafiah Harvey
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Bilateral Trade ◽  
Research Direction ◽  
Asymmetric Effects ◽  
Nonlinear Ardl ◽  
Long Run ◽  
Ardl Approach ◽  
Short Run ◽  
Exchange Rate Changes

Previous studies that tested the short-run and long-run effects of exchange rate changes on trade balances assumed that the effects are symmetric. The more recent research direction has now changed to investigating the possibility of asymmetric effects. In this paper, we assess the short-run and long-run effects of exchange rate changes on the bilateral trade balances of Singapore with her 11 partners. By applying the nonlinear ARDL approach, which separates appreciations from depreciations, we find that exchange rate changes have short-run asymmetric effects in most models. The short-run effects, however, lasted into the long run in a few models. In the long run, while depreciation improves Singapore’s trade balance with the U.S., it hurts it with Malaysia and China. These three partners account for almost 50 % of Singapore’s trade.

scholarly journals Asymmetric Effects of Policy Uncertainty on the Demand for Money in the United States

2018 ◽  
Vol 12 (1) ◽  
pp. 1 ◽  
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Majid Maki-Nayeri
Keyword(s):  
Money Demand ◽  
The United States ◽  
Economic Factors ◽  
Policy Uncertainty ◽  
Demand For Money ◽  
The Public ◽  
Asymmetric Effects ◽  
Long Run ◽  
Clear Sign ◽  
Macro Variables

A comprehensive measure of economic uncertainty, known as “Policy Uncertainty”, which was constructed by the Economic Policy Uncertainty Group by searching popular newspapers for uncertain terms associated with economic factors and its impact on macro variables, is gaining momentum. Although some researchers have assessed its impact on the demand for money in a few countries, we considered the U.S.A. demand for money one more time and showed that when a linear money demand was estimated, policy uncertainty had no long-run effects. However, when a nonlinear model was estimated, the results showed that while increased policy uncertainty induces the public to hold less money in the long run, decreased uncertainty has no long-run effects, a clear sign of asymmetric response.

scholarly journals The Macro-Economic Reform And The Demand For Money In India

2011 ◽  
Vol 10 (10) ◽  
pp. 61
Author(s):  
Basab Dasgupta ◽  
Rangan Gupta
Keyword(s):  
Economic Reform ◽  
Money Demand ◽  
Demand For Money ◽  
Limited Ability ◽  
Economic Agents ◽  
Demand Functions ◽  
Elasticity Of Demand ◽  
Long Run ◽  
Short Run ◽  
Scale Variable

This paper is an attempt to estimate the short-run and long-run money demand functions in India during the 90s. The paper tries to closely follow the methodologies laid down in Chow (1966), Hendry (1980), Rose (1985) and Hwang (1985). The main findings of the paper are: 1) permanent income is not an appropriate representation of the scale variable, 2) the positive interest elasticity of demand for money in the short-run, 3i) limited ability of economic agents in removing disequilibrium of past period, and 4) rejection of the real adjustment hypothesis.

scholarly journals Broad Money Demand in Mauritius with Implications for Monetary Policy

2012 ◽  
Vol 4 (8) ◽  
pp. 436-448
Author(s):  
Indranarain Ramlall
Keyword(s):  
Money Demand ◽  
Demand Function ◽  
Adjustment Coefficient ◽  
Elasticity Coefficient ◽  
Demand For Money ◽  
Money Demand Function ◽  
Long Run ◽  
Monetary Targeting ◽  
Short Run ◽  
Local Stock

This paper employs ECM approach to investigate the long run and short-run components of the broad money demand function in Mauritius for the period spanning from 2000 to 2009. To the author’s best knowledge, no study has been undertaken over broad money in Mauritius since 1992, with an update being long overdue. Results show that M2 is positively elastic with respect to GDP, with the elasticity coefficient revolving around 2.80%, clearly showing that Mauritius is not endowed with a fully developed financial system with monetization moving faster than output. The low adjustment coefficient for VECM furthers substantiates the fact that there is indeed a lack of alternative assets to M2 and above all fully justifies the transition from monetary targeting to interest rate targeting. Evidence is found in favor of foreign asset substitution but only through the exchange rate channel. Findings further show that the local stock market does not act as a substitute to local money holdings. Overall, the study points out a rather stable demand for money function in Mauritius so that the monetary authority can contemplate using it as a complementary tool but chiefly for long-run policy assessments.

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