Is There a Change in the Money Demand Stability in Turkey? A Nonlinear Approach

The details of a central bank’s monetary policy are based on assumptions about the money demand. This requires researches that aim to investigate money demand dynamics. Knowing these dynamics will support the identification of risks that may pose a threat to price stability in the long run. This study aims to analyze the changes observed in the demand for money during the last 35 years (1986-2020) in Turkey. When the analyzing period is considered as a whole in the study, it is determined that the demand for money is not stable. However, the nonlinear cointegration analysis used within the framework of soft transition models indicates that the money demand model can be divided into two different regimes with stability. In this case, it is possible to talk about the existence of a transition period in which stability is lost in the demand for money. The analyzing technique used allows the coefficients obtained for money demand to change over time according to the regime in which the economy operates. Nonlinear estimation results indicate that there is a long-term relationship between the demand for money and its macroeconomic determinants such as price level, income, interest rate, and money holding preferences of economic agents.

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

International Business & Economics Research Journal (IBER) ◽

10.19030/iber.v10i10.5981 ◽

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.

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Modelling the Demand for Money in Pakistan

The Pakistan Development Review ◽

10.30541/v44i3pp.233-252 ◽

2005 ◽

Vol 44 (3) ◽

pp. 233-252 ◽

Cited By ~ 5

Author(s):

Abdul Qayyum

Keyword(s):

Money Demand ◽

Important Determinant ◽

Cointegration Analysis ◽

Demand For Money ◽

Market Rate ◽

Bond Yield ◽

Long Run ◽

Error Correction Mechanism ◽

Demand Behaviour ◽

Relevant Class

The study estimates the dynamic demand for money (M2) function in Pakistan by employing cointegration analysis and error correction mechanism. The parameters of preferred model are found to be super-exogenous for the relevant class of interventions. It is found that the rate of inflation is an important determinant of money demand in Pakistan. The analysis reveals that the rates of interest, market rate, and bond yield are important for the long-run money demand behaviour. Since the preferred model is superexogenous, it can be used for policy analysis in Pakistan.

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Optimal Combination of Currency Assets and Algorithm Simulation under Exchange Rate Risk

Complexity ◽

10.1155/2020/8816382 ◽

2020 ◽

Vol 2020 ◽

pp. 1-10

Author(s):

Jun Wei

Keyword(s):

Money Demand ◽

Dynamic Equilibrium ◽

Money Market ◽

Demand Model ◽

Demand For Money ◽

Virtual Economy ◽

The Interest Rate ◽

Economic Assets ◽

Social Wealth ◽

The Impact

The excess money supply did not lead to a rapid rise in the price index, which in turn triggered inflation. In this case, the redetermination of the demand for money is particularly important. At the same time, with the continuous expansion of the capital market and the rapid development of the virtual economy, the virtual economy is gradually deviating from the real economy. When selecting assets, microentities often incorporate virtual economic assets into investment considerations. Therefore, it is necessary to establish a money demand model that considers the impact of virtual economic assets. This paper uses the asset selection of microentities as the microfoundation to establish a money demand model to explain its economic significance. And based on the money demand model established, a dynamic equilibrium model of the money market was established, and the stability of the dynamic equilibrium point of the money market was verified through mathematical deduction. Based on the dynamic equilibrium model of the money market, the impact of money supply was analyzed. In order to verify the correctness of the aforementioned theory, this paper conducts an empirical analysis. Through cointegration analysis and the vector error correction model (VECM model), the correctness and applicability of the established money demand model are verified, and money demand, total social wealth, spreads between expected stock returns and interest rates, and real estate expectations are found. There is a long-term equilibrium relationship between the rate of return and the interest rate. The total amount of social wealth, the expected rate of return on stocks, and the interest rate spread will have an impact on the demand for money in the short term.

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

Economic Journal of Development Issues ◽

10.3126/ejdi.v25i1-2.25090 ◽

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.

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Exchange Rate and Demand for Money in Nigeria

Research in Applied Economics ◽

10.5296/rae.v7i2.7916 ◽

2015 ◽

Vol 7 (2) ◽

pp. 21

Author(s):

BigBen Chukwuma Ogbonna

Keyword(s):

Exchange Rate ◽

Exchange Rates ◽

Foreign Exchange ◽

Money Demand ◽

Black Market ◽

Easy Access ◽

Market Exchange ◽

Demand Model ◽

Demand For Money ◽

Official Exchange Rate

<p>This study is designed to examine empirically the impact of exchange rate on the stability of demand for money in Nigeria where official and black market exchange rates operate side by side due to exchange controls. Variants of money demand model are estimated using monthly data for the period of 2005-2013. Cointegration and system equation techniques combined with CUSUM and CUSUMSQ tests are employed in the data analysis. Results indicate that in all the variants of the money demand model, coefficients of exchange rates variable (official or black market exchange rates) manifest significant <em>t</em> statistics, meaning that the null hypothesis of restricting the coefficients of exchange rates in money demand model in Nigeria is rejected for each variant. This suggests that coefficient of exchange rates variable (OMEXR or BMEXR) belongs to the cointegrating space in all the instances. Judging from the freakiness of the coefficients of the variants of the money demand function and the results of the tests for stability of the models combined, the most appropriate demand for money function for Nigeria appear to be the one that includes M1, the interest rate, inflation rate, and official exchange rate. This implies that in Nigeria, a greater percentage of the foreign exchange demand may be public sector driven and substantial percentage of the private sector foreign exchange needs is sourced from the official exchange rate market due to the substantial disparity between the two rates. This may mean consumers’ easy access to official exchange rate and transparency in the operation of official exchange rate market in Nigeria.</p>

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

Global Economy Journal ◽

10.1142/s2194565920500074 ◽

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.

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META-ANALYSIS OF MONEY DEMAND IN INDONESIA

Buletin Ekonomi Moneter dan Perbankan ◽

10.21098/bemp.v15i1.415 ◽

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

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

Business and Economic Research ◽

10.5296/ber.v10i1.16231 ◽

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.

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Housing Prices and Money Demand: Empirical Evidence in Selected MENA Countries

Review of Middle East Economics and Finance ◽

10.1515/rmeef-2017-0034 ◽

2019 ◽

Vol 15 (1) ◽

Author(s):

Nadia Mbazia ◽

Mouldi Djelassi

Keyword(s):

Money Demand ◽

House Prices ◽

Housing Prices ◽

House Price ◽

Structural Features ◽

Demand Model ◽

Mena Countries ◽

Long Run ◽

Short Run ◽

Dynamic Relationships

Abstract This paper examines the links between housing and money empirically in a money demand framework for a panel of five Middle East and North Africa (MENA) countries using quarterly data from 2007Q3 to 2014Q4 with the inclusion of house prices as a variable representing the developments in housing markets. We applied the Pool Mean Group Estimation technique to estimate the long-run and short-run dynamic relationships in money demand model. Empirical results provide the evidence that higher house prices lead to a rise in M2 demand in long-run and short-run estimations. This finding may explain the importance influence of the house price developments on monetary policy in MENA countries. The results confirm that the cross-country heterogeneity of money holdings is also connected with structural features of the housing market.

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