scholarly journals An Analysis of the Money Demand Function for Zambia: A Gregory Hansen Cointegration Approach

2021 ◽  
Vol 13 (1(J)) ◽  
pp. 1-12
Author(s):  
Peter Nsokolo Mumba ◽  
Emmanuel Ziramba
Keyword(s):  
Money Demand ◽  
Demand Function ◽  
Time Series Data ◽  
Series Data ◽  
Level Shift ◽  
Money Demand Function ◽  
Real Money ◽  
Long Run ◽  
Parsimonious Model ◽  
The Stability

The objective of this study was to analyze the money demand function for Zambia for the period 1978 – 2018 using annual time series data. The study employed the Gregory Hansen cointegration technique. The study also employed Hendry’s General to Specific technique to estimate the error correction model by obtaining a parsimonious model. The results of the Gregory Hansen test confirmed the presence of a cointegrating relationship and selected the GH-2 model as the most plausible model with a level shift and a trend. The results also endogenously determined 1994 as the break year in the money demand function. Other interesting results obtained by the study suggest that inflation and interest rate are the robust determinants of real money demand both in the short and long run. Furthermore, unlike many other developing countries, the results show that money is a necessity in Zambia. The other interesting results suggested by the study are that the financial sector reforms of 1994 diminished the demand for real money; however, the positive time trend suggests that there has been an increase in real money holdings over time in Zambia. The low-interest elasticity of money demand also potentially compromises the effectiveness of money supply as a monetary policy tool for economic stabilization. The results of the CUSUM and CUSUMSQ confirm the stability of the money demand function in Zambia.

scholarly journals STRUCTURAL BREAKS DAN KETIDAKSTABILAN PERMINTAAN UANG DI INDONESIA

2018 ◽  
Vol 6 (2) ◽  
pp. 47-60
Author(s):  
Deviyantini Deviyantini ◽  
Iman Sugema ◽  
Tony Irawan
Keyword(s):  
Money Demand ◽  
Structural Breaks ◽  
Structural Changes ◽  
Demand Function ◽  
Time Series Data ◽  
Series Data ◽  
Time Varying ◽  
Economic Shocks ◽  
Money Demand Function ◽  
Time Varying Parameter

This research aims to identify the sources of instability of the money demand function (M1 and M2) due to structural changes that occur as a result of economic shocks. These shocks are technically shown by the presence of structural breaks in the data and can lead the parameters non-constancy. The instability of the money demand function was analyzed using the Gregory and Hansen test. The source of instability of the money demand was identified using time varying parameter model. This research used quarterly time series data from 1993Q1 to 2013Q4. The results show that the money demand function (M1 dan M2) is not cointegrated (unstable) and the source of the instability is exchange rate variable. Keywords: Stability money demand, Structural breaks, Time varying parameter model

scholarly journals Structural Adjustment And The Stability Of The Nigerian Money Demand Function

2011 ◽  
Vol 3 (8) ◽  
Author(s):  
Olugbenga A. Onafowora ◽  
Oluwole Owoye
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Money Demand ◽  
Structural Adjustment ◽  
Demand Function ◽  
Money Demand Function ◽  
The Real ◽  
Long Run ◽  
The Stability ◽  
Domestic Interest Rate

This paper uses cointegration vector error correction analysis to test the stability of the demand for real broad money (M2) in Nigeria over the quarterly period 1986:1 to 2001:4 in order to ascertain whether recent macroeconomic developments such as the implementation of the structural adjustment programme (SAP) in 1986; the liberalization of the exchange rate, domestic interest rate, and capital accounts; financial deepening and innovations; changes in monetary policy regimes; and increased integration of the economy with the rest of the world may have caused the real broad money demand function to become structurally unstable. Our empirical results indicate that there exists a long-run relationship between the real broad money aggregate, real income, inflation rate, domestic interest rate, foreign interest rate, and expected exchange rate. Furthermore, both the CUSUM and CUSUMSQ tests confirm the stability of the short- and long run parameters of the real money demand function. The stability of the parameters of the money demand equation provides the justification for the monetary authority to target the broad money supply in its bid to manage inflation and stimulate economic activity in Nigeria.

Determinants and Stability of Money Demand during Financial Liberalization in Sub-Saharan Africa: The Case of Uganda using an ARDL Approach

2020 ◽  
Author(s):  
Allan Kayongo ◽  
Ibrahim Mukisa ◽  
Ibrahim Mike Okumu
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Money Demand ◽  
Demand Function ◽  
Financial Liberalization ◽  
Money Demand Function ◽  
Real Money ◽  
Financial Innovations ◽  
Long Run ◽  
Demand Stability

Abstract We analyse the determinants and stability of Uganda’s real money demand function during financial liberalization. The study contributes to literature in 4 ways, i.e.: assessing the determinants and stability of Uganda’s money demand function for the financial liberalization period; this is also done while incorporating the presumably disruptive financial innovations; assessing Uganda’s money demand stability during this episode; and applying the ARDL estimation strategy on Uganda’s Monetary Policy. GDP, exchange rate, inflation, interest rate spread and foreign interest rate explain Uganda’s real money demand. The results confirm the existence of a stable long run money demand function. The error correction term is significant and negative. Fundamentally, the financial innovations have not caused structural divergence in Uganda’s long run money demand function as would have been expected. Income is significant and close to unity and therefore a good money demand indicator in both the short and long run. Most importantly, financial innovation efforts in Uganda’s monetary policy should be intensified since they haven’t had negative effects on monetary stability. Keywords: money demand, stability, financial liberalization, financial innovations JEL Classification: E41; E52; E6; O23

scholarly journals STRUCTURAL BREAKS DAN KETIDAKSTABILAN PERMINTAAN UANG DI INDONESIA

2018 ◽  
Vol 6 (2) ◽  
pp. 47-60
Author(s):  
Deviyantini Deviyantini ◽  
Iman Sugema ◽  
Tony Irawan
Keyword(s):  
Money Demand ◽  
Structural Breaks ◽  
Structural Changes ◽  
Demand Function ◽  
Time Series Data ◽  
Series Data ◽  
Time Varying ◽  
Economic Shocks ◽  
Money Demand Function ◽  
Time Varying Parameter

This research aims to identify the sources of instability of the money demand function (M1 and M2) due to structural changes that occur as a result of economic shocks. These shocks are technically shown by the presence of structural breaks in the data and can lead the parameters non-constancy. The instability of the money demand function was analyzed using the Gregory and Hansen test. The source of instability of the money demand was identified using time varying parameter model. This research used quarterly time series data from 1993Q1 to 2013Q4. The results show that the money demand function (M1 dan M2) is not cointegrated (unstable) and the source of the instability is exchange rate variable. Keywords: Stability money demand, Structural breaks, Time varying parameter model

scholarly journals Seasonal co-integration: An extention of the Johansen and Schaumburg approach with an exclusion test

2009 ◽  
Vol 56 (1) ◽  
pp. 39-53
Author(s):  
Ozlem Tasseven
Keyword(s):  
Money Demand ◽  
Time Series Data ◽  
A Priori ◽  
Series Data ◽  
General Acceptance ◽  
Long Run ◽  
Turkish Economy ◽  
Variable Space ◽  
Annual Frequency ◽  
Seasonal Cointegration

In this paper, the Johansen and Schaumburg method for seasonal cointegration has been tried to be applied for testing an a priori hypothesized cointegrating money demand variable space. We aim to provide a comprehensive discussion of the significance of the variables in the long-run context as stationary relationships for both zero and bi-annual frequencies. For this purpose, several restrictions have been used to impose for identification purposes of the relevant vectors. We also touch upon the possibility that most time series data have been subject to the stochastic seasonality as opposed to the general acceptance in empirical papers. Our results employing data from the Turkish economy show that it is not possible to estimate only a single theory-accepted money demand relationship in the long-run variable space for both zero and bi-annual frequences, but we are able to identify different vectors somewhat consistent with theoretical arguments for the annual frequency.

scholarly journals Comparative Analysis of the Stability of Money Demand between Côte d’Ivoire And Ghana: An Application of ARDL Model

2017 ◽  
Vol 9 (11) ◽  
pp. 163
Author(s):  
Yao Kouadio Ange-Patrick ◽  
Drama Bédi Guy Hervé
Keyword(s):  
Cote D'ivoire ◽  
Money Demand ◽  
Côte D’Ivoire ◽  
Demand Function ◽  
African Countries ◽  
Money Demand Function ◽  
Cote D’Ivoire ◽  
Côte D'ivoire ◽  
Short Run ◽  
The Stability

This paper empirically examined the broad money demand function and its stability in two West African countries namely Cote d’Ivoire and Ghana covering the period of 1980 to 2015 using the Autoregressive Distributed Lag (ARDL) Bounds testing procedure. The empirical results confirm the stability of the money demand function and support the choice of M2 as a viable instrument for policy implementation in both countries cited above. The study also demonstrates that a long-run relationship exists between money aggregate (M2) and its determinants during the study period. In fact, the real income tends to be the most significant factor explaining the demand for broad money in both countries. In addition, the overall short run estimation of our model is statistically significant for Cote d’Ivoire and insignificant for Ghana at the conventional level. This means that money demand is stable for Cote d’Ivoire in short run and unstable for Ghana in the same period. It is recommended that monetary policy authorities should continue to implement policies that will reinforce macroeconomic stability and facilitate economic growth.

scholarly journals On the (Ir)Relevance of Monetary Aggregate Targeting in Pakistan: An Eclectic View

2013 ◽  
Vol 18 (2) ◽  
pp. 65-119
Author(s):  
Adnan Haider ◽  
Asad Jan ◽  
Kalim Hyder
Keyword(s):  
Monetary Policy ◽  
Money Demand ◽  
Demand Function ◽  
Policy Framework ◽  
Monetary Aggregate ◽  
Money Demand Function ◽  
Financial Innovations ◽  
The Stability ◽  
Nominal Anchor ◽  
Monetary Policy Framework

This study attempts to identify a stable money demand function for Pakistan’s economy, where the monetary aggregate is considered the nominal anchor. With evolving financial innovations and regulations, the stability of money demand has been the focus of numerous debates. Where earlier studies have provided conflicting explanations due to inadequate specifications and imprecise estimations, we find that money demand in Pakistan is stable, if specified properly. For developing countries such as Pakistan, it is important to target monetary aggregates or respond to deviations from the desirable path if monetary policy is to be effectively implemented and communicated; this should remain, if not a primary, then an auxiliary target in the monetary policy framework.

scholarly journals The Impact of Financial Innovation on the Money Demand Function: An Empirical Verification in India

2020 ◽  
Vol 14 (1) ◽  
pp. 28-61 ◽  
Author(s):  
Masudul Hasan Adil ◽  
Neeraj Hatekar ◽  
Pravakar Sahoo
Keyword(s):  
Money Demand ◽  
Demand Function ◽  
Financial Innovation ◽  
Jel Classification ◽  
Parameter Estimates ◽  
Correlated Errors ◽  
Bounds Testing ◽  
Money Demand Function ◽  
Long Run ◽  
The Impact

Traditional money demand functions are often criticized for persistent over-prediction, implausible parameter estimates, highly serially correlated errors and unstable money demand. This study argues that some of these problems may have emerged for the lack of factoring financial innovation into the money demand function. This study estimates money demand for India during the post-reform period, from 1996:Q2 to 2016:Q3. The money demand function is estimated with the linear ARDL approach to cointegration developed by Pesaran, Shin, & Smith (2001), Bounds testing approaches to the analysis of level relationships, Journal of Applied Econometrics, 16(3), 289–326, after employing various proxies for financial innovation. In conclusion, the study finds that there is a stable long-run relationship among variables, such as real money balances, and the scale and opportunity cost variables. In a nutshell, the study assesses the relative importance of financial innovation variables in the money demand equation, and finds that financial innovation plays a very significant role in the money demand specification and its stability. JEL Classification: E41, E44, E42, E52, O16, O53

On the Constancy of Hedonic Wine Price Coefficients over Time

2019 ◽  
Vol 14 (2) ◽  
pp. 182-207 ◽  
Author(s):  
Benoît Faye ◽  
Eric Le Fur
Keyword(s):  
Time Series ◽  
Literature Review ◽  
Time Series Data ◽  
Hedonic Model ◽  
Series Data ◽  
Extensive Literature ◽  
Long Run ◽  
The Stability ◽  
Over Time ◽  
Jel Classifications

AbstractThis article tests the stability of the main hedonic wine price coefficients over time. We draw on an extensive literature review to identify the most frequently used methodology and define a standard hedonic model. We estimate this model on monthly subsamples of a worldwide auction database of the most commonly exchanged fine wines. This provides, for each attribute, a monthly time series of hedonic coefficients time series data from 2003 to 2014. Using a multivariate autoregressive model, we then study the stability of these coefficients over time and test the existence of structural or cyclical changes related to fluctuations in general price levels. We find that most hedonic coefficients are variable and either exhibit structural or cyclical variations over time. These findings shed doubt on the relevance of both short- and long-run hedonic estimations. (JEL Classifications: C13, C22, D44, G11)

Testing the stability of money demand function in Lesotho

2018 ◽  
Vol 10 (4) ◽  
pp. 383
Author(s):  
Moeti Damane ◽  
Lira P. Sekantsi ◽  
Senei Solomon Molapo
Keyword(s):  
Money Demand ◽  
Demand Function ◽  
Money Demand Function ◽  
The Stability
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