Long- and short-run determinants of the demand for money in the Asian-Pacific countries: An empirical panel investigation

Abbas Valadkhani

37 citations0/0 files storedSwinburne figshare (Swinburne University of Technology)

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Abstract

This paper examines the long- and short-run determinants of the demand for money in six countries in the Asian-Pacific region using panel data (1975-2002). Various country-specific coefficients are allowed to capture inter-country heterogeneities. Consistent with theoretical postulates, it is found that (a) the demand for money in the long-run positively responds to real income and inversely to the interest rate spread, inflation, the real effective exchange rate, and the US real interest rate; (b) the long-run income elasticity is greater than unity; and (c) both the currency substitution and capital mobility hypotheses hold only in the long run.

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References

2003Testing for unit roots in heterogeneous panels 1963Capital Mobility and Stabilization Policy Under Fixed and Flexible Exchange Rates 1997The Demand for Money: Theories, Evidence, and Problems 2003Money and inflation in the euro area: A case for monetary indicators?2001The demand for M3 in the euro area 2001Another look at long-run money demand 2000A Survey of Recent Empirical Money Demand Studies 1998Empirical modeling of money demand

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