Articlegreen2005

On stability of the demand for money in a developing OECD country: the case of Turkey

33 citations0/0 files storedGlobal Business and Economics Review

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Monetary Policy and Economic Impact Economic Theory and Policy Economic theories and models

Abstract

This paper empirically analyses the stability of the narrow money demand function (M1) in Turkey for the period 1950?2002. As part of the IMF sponsored stabilisation programme, Turkey has been pursuing base money targets. To ascertain whether this policy framework satisfies the necessary condition for effectiveness, we estimate and test for the stability of Turkish M1 by employing a recent single cointegration procedure proposed by Pesaran et al. (2001) along with the CUSUM and CUSUMSQ stability tests. We demonstrate that there is a stable money demand function and it could be used as an intermediate target of monetary policy in Turkey.

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References

1987Co-Integration and Error Correction: Representation, Estimation, and Testing 2001Bounds testing approaches to the analysis of level relationships 1990MAXIMUM LIKELIHOOD ESTIMATION AND INFERENCE ON COINTEGRATION — WITH APPLICATIONS TO THE DEMAND FOR MONEY 1990Statistical Inference in Instrumental Variables Regression with I(1) Processes 2012An Autoregressive Distributed-Lag Modelling Approach to Cointegration Analysis 1963Capital Mobility and Stabilization Policy Under Fixed and Flexible Exchange Rates 2008An Autoregressive Distributed-Lag Modelling Approach to Cointegration Analysis 1992Tests for Parameter Instability in Regressions with 1(1) Processes

Cited by

2017Do exchange rate changes have symmetric or asymmetric effects on the demand for money in Turkey?2016Investigating the Stability of Money Demand in Ghana 2018Asymmetric impacts of foreign exchange rate on the demand for money in Turkey: new evidence from nonlinear ARDL 2013The Demand for Money in Nigeria: Evidence from Bounds Testing Approach

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