scholarly journals Money Demand Balances and Exchange Rate in Pakistan: A Time Series Analysis

2020 ◽  
Vol 6 (4) ◽  
pp. 1389-1399
Author(s):  
Shazia Sana ◽  
Shahnawaz Malik ◽  
Muhammad Ramzan Sheikh ◽  
Muhammad Hanif Akhtar
Keyword(s):  
Exchange Rate ◽  
Money Demand ◽  
Demand Function ◽  
Demand For Money ◽  
Money Demand Function ◽  
Ardl Approach ◽  
Non Linear ◽  
Demand Stability ◽  
The Impact ◽  
Yearly Data

This paper investigates the impact of exchange rate on the money demand balances in Pakistan by applying linear and non-linear ARDL approach. The purpose of study is not only examining the impact of exchange rate and demand for money but also to analyze that whether demand for money in Pakistan is stable or not. For the estimation of money demand function yearly data are used from the 1972 to 2019. The findings of linear ARDL suggest that exchange rate and demand for money balances are positively related. Moreover, Non-linear ARDL exhibit that positive and negative shocks in exchange rate have mixed findings for money demand while asymmetric test shows that exchange rate has symmetric effects for money demand. Stability test suggest the stable money demand in Pakistan.

scholarly journals THE MONEY DEMAND FUNCTIONS IN ISLAMIC ECONOMY: NEW EVIDENCE FROM IRAN-ARDL APPROACH

2019 ◽  
Vol 4 (2) ◽  
pp. 205-222
Author(s):  
Farzaneh Sadeghi ◽  
Saeed Khadivy Rofougar
Keyword(s):  
Money Demand ◽  
Demand Function ◽  
Policy Decision ◽  
Demand For Money ◽  
Money Demand Function ◽  
Time Model ◽  
Monetary Economy ◽  
Ardl Approach ◽  
Islamic Republic Of Iran ◽  
Rental Rate

The demand for money is one of the most fundamental issues of the monetary economy for policy decision. On the other hand, according to the principle of prohibition of Riba, attitudes about the money market conditions in Islamic economics, is quite different from conventional economics. Hence achieving the money demand function in an Islamic country would be necessary. Most studies about the money demand in Islamic economy used the Keynesian approach, while in modern macroeconomics, money demand function derived by using the microeconomics-based approach. Hence in this article investigate some models of the microeconomics-based approach, then, in accordance with Islamic principles, it choose the best among them that is shopping-time model. After that we derive the Islamic money demand function. The results indicate that the demand for money is the function of income and rental rates of sukuk. The marginal product of capital due to an additional unit of income spend for Infaq (spending in Allah's way), depend on the expected inflation rate, depreciation rate and rental rates of Sukuk. In this paper, apply ARDL approach to estimate the money demand function in Islamic republic of Iran in period of 1978-2008 i.e. after Islamic revolution. The results suggested that M1 and M2 money demand are co-integrated with income and rental rate of Sukuk. Incorporating CUSUM and CUSUMSQ tests into co-integration analysis, we conclude that M2 money demand is more stable than M1.

Exchange Rate Flexibility And Monetary Policy

2011 ◽  
Vol 14 (2) ◽  
pp. 69
Author(s):  
Hamid Milani
Keyword(s):  
Exchange Rate ◽  
Money Demand ◽  
Demand Function ◽  
Monetary Shocks ◽  
Industrialized Countries ◽  
Exchange Rate Flexibility ◽  
Demand For Money ◽  
Money Demand Function ◽  
Floating Rates ◽  
Insulating Properties

<span>It has been argued that floating rates protect economies from monetary shocks originated abroad and provide great autonomy and independence. Those who have tried to use the money demand function to explain insulating properties have excluded exchange rate flexibility variable in their models. This paper estimates a money demand function that includes exchange rate flexibility as another determinant of the demand for money for the major industrialized countries.</span>

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

Malaysian Money Demand Function Revisited: The ARDL Approach

2008 ◽  
Vol 9 (2) ◽  
pp. 193-209 ◽  
Author(s):  
Mahendhiran Nair ◽  
Muthi Samudram ◽  
Santha Vaithilingam
Keyword(s):  
Money Demand ◽  
Demand Function ◽  
Money Demand Function ◽  
Ardl Approach

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.

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