scholarly journals Structural Breaks, Stability and Demand for Money in South Africa

2015 ◽  
Vol 7 (5(J)) ◽  
pp. 79-90
Author(s):  
Sambulo Malumisa
Keyword(s):  
South Africa ◽  
Money Demand ◽  
Structural Breaks ◽  
Demand Function ◽  
Money Demand Function ◽  
Correction Model ◽  
Cointegrating Vector ◽  
Long Run ◽  
Maximum Likelihood Procedure ◽  
Policy Shifts

The paper tests the null hypothesis of a stable long-run money demand in South Africa over the period 1970-2013. We employ the Gregory-Hansen (GH) method to test for the possibility of structural breaks in the money demand function. The Johansen Maximum likelihood procedure is carried out to determine the cointegration vector from which existence of one cointegrating vector is supported. Also based on the GH criterion, there is existence of one cointegrating vector. GH proposes three structural breaks for the money demand function. Results suggest that endogenous breaks occurred in 1991 and 1994. The GH cointegration equations reject M1 whilst M2 and M3 pass and we proceed to estimate the error-correction model. Complemented by the CUSUM and CUSUM of squares, the tests carried out suggest that monetary policy shifts did not introduce instability.

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

scholarly journals Money Demand In South Africa Revisited: A Detailed Analysis Of Different Models

2013 ◽  
Vol 12 (4) ◽  
pp. 427
Author(s):  
Ferdinand Niyimbanira
Keyword(s):  
South Africa ◽  
Monetary Policy ◽  
South African ◽  
Money Demand ◽  
Demand Function ◽  
Theory And Practice ◽  
Empirical Literature ◽  
Future Research ◽  
Demand For Money ◽  
Money Demand Function

Many macroeconomists acknowledge the importance of behavior in a money demand relationship when formulating an efficient monetary policy. Many efforts have been made to estimate the money demand in function using many different specifications. This paper discusses South African empirical literature review of money demand. It revealed that different methods have been used to analyze the demand for money in South Africa, such as the linear function approach, the partial stock adjustment model, and the buffer stock disequilibrium money model. This study also discovered that few studies are done using co-integration and error correction methods and not all of these studies show that the money demand function in South Africa is stable. Implication for theory and practice, as well as area of future research, are also discussed in the study.

scholarly journals Structural Breaks dan Ketidakstabilan Permintaan Uang di Indonesia

2017 ◽  
Vol 17 (2) ◽  
pp. 169-183
Author(s):  
Deviyantini Deviyantini ◽  
Iman Sugema ◽  
Tony Irawan
Keyword(s):  
Time Series ◽  
Exchange Rate ◽  
Interest Rate ◽  
Money Demand ◽  
Structural Breaks ◽  
Demand Function ◽  
Series Data ◽  
Time Varying ◽  
Money Demand Function ◽  
Time Varying Parameter

Structural Breaks and Instability of Money Demand in IndonesiaThis 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 result of Gregory and Hansen test indicates there is no long term equilibrium between variables (money demand, income, domestic interest rate, foreign interest rate, exchange rate, and inflation) in the model, neither M1 nor M2 model. On the other word, money demand function is unstable. The source of the instability is exchange rate variable.Keywords: Stability Money Demand; Structural Breaks; Time Varying Parameter ModelAbstrakPenelitian ini bertujuan untuk mengidentifikasi sumber-sumber ketidakstabilan fungsi permintaan uang (M1 dan M2) akibat dari perubahan struktural yang terjadi karena adanya guncangan ekonomi. Guncangan tersebut, yang secara teknis ditunjukkan oleh keberadaan structural breaks di dalam data, dapat menyebabkan parameter menjadi tidak konstan. Ketidakstabilan fungsi permintaan uang dianalisis dengan menggunakan Gregory and Hansen test. Sumber ketidakstabilan dari permintaan uang diidentifikasi dengan menggunakan time varying parameter model. Penelitian ini menggunakan data time series dalam bentuk kuartalan dari 1993Q1 sampai 2013Q4. Hasil Gregory and Hansen test menunjukkan bahwa tidak ada keseimbangan jangka panjang di antara variabel-variabel (permintaan uang, pendapatan, suku bunga domestik, suku bunga luar negeri, nilai tukar, dan inflasi) di dalam model, baik pada model M1 maupun M2. Dengan kata lain, fungsi permintaan uang tidak stabil. Sumber ketidakstabilan tersebut berasal dari variabel nilai tukar.

scholarly journals An Investigation Into The Demand For Broad Money In South Africa

2014 ◽  
Vol 13 (6) ◽  
pp. 1419
Author(s):  
Moreblessing Simawu ◽  
Courage Mlambo ◽  
Genius Murwirapachena
Keyword(s):  
South Africa ◽  
Money Demand ◽  
Capital Mobility ◽  
Vital Role ◽  
Correction Model ◽  
Explanatory Variables ◽  
Long Run ◽  
Short Run ◽  
Implementation Of Monetary Policy ◽  
The Impact

A stable money demand function plays a vital role in the planning and implementation of monetary policy. With the use of Johansen co-integration and error correction model estimates, this study examines the existence of a stable long-run relationship between real broad money demand ( RM3) and its explanatory variables in South Africa for the period 1990-2009. In contrast to previous analyses, this study augments the co-integration and vector autoregression (VAR) analysis with impulse response and variance decomposition analyses to provide robust long-run effects and short-run dynamic effects on the real money demand. In addition, this study introduces a foreign interest rate to capture the impact of capital mobility on money demand in South Africa. Results from the Johansen test suggest that real broad money demand (RM3) and its all explanatory variables are cointegrated.

scholarly journals On the nexus between Stock Market Fluctuations and the Demand for Money in Saudi Arabia

2020 ◽  
Vol 10 (1) ◽  
pp. 142
Author(s):  
Moayad Al Rasasi ◽  
Fares Rawah ◽  
Bander Alghamdi
Keyword(s):  
Saudi Arabia ◽  
Interest Rate ◽  
Money Demand ◽  
Stock Prices ◽  
Demand Function ◽  
Positive Impact ◽  
Demand For Money ◽  
Money Demand Function ◽  
Long Run ◽  
Estimated Error

This research paper estimates the augmented money demand function for Saudi Arabia while incorporating stock prices as one of the key determinants and utilizing quarterly data spanning over the period of 2010-2018. The estimated money demand function coincides with theoretical expectation regarding income and interest rate over long run. In Particular, the demand for money is statistically significant and positively related with income while it’s negatively related with interest rate. On stock prices, the findings suggest that they are statistically significant and have positive impact on money demand over the long run. Moreover, the estimated error correction model indicates that it takes money demand about two quarters to adjust to its equilibrium condition.

scholarly journals Financial Development and Money Demand Function: Cointegration, Causality and Variance Decomposition Analysis for Pakistan

2017 ◽  
Vol 18 (4) ◽  
pp. 811-824 ◽  
Author(s):  
Muhammad Ahad
Keyword(s):  
Exchange Rate ◽  
Financial Development ◽  
Money Demand ◽  
Industrial Production ◽  
Unit Root ◽  
Demand Function ◽  
Decomposition Analysis ◽  
Money Demand Function ◽  
Long Run ◽  
Short Run

This study has investigated money demand function incorporating financial development, industrial production, income and exchange rate for Pakistan for time span from 1972 to 2012. Bayer–Hanck combined cointegration and Johansen cointegration approaches have been used to test cointegration among variables and vector error correction model (VECM) approach has been applied to explain the direction of causality in the long run and short run. Unit root problem has been tested by augmented Dickey–Fuller (ADF) and Phillips–Perron (PP) unit root tests. The results indicate that feedback effect is found between financial development and money demand. There is a long-run relationship existing among money demand, financial development, income, industrial production and exchange rate. Financial development is the main factor to determine money demand function in both long run and short run.

scholarly journals Long-Run Money Demand Function: Search for Stability in Twenty (20) Non-EMU Member Countries

2021 ◽  
Vol 9 (1) ◽  
pp. 58-87
Author(s):  
Michael Asiedu ◽  
Patrick Bimpong ◽  
Thomas Hezkeal Nan Khela ◽  
Benedict Arthur
Keyword(s):  
Money Demand ◽  
Demand Function ◽  
Money Demand Function ◽  
Long Run
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