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Assessing the Stability of Money Demand Function in Saudi Arabia

Author

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  • Moayad H. Al Rasasi

    (Economics Research Department Saudi Arabian Monetary Authority, Saudi Arabia)

Abstract

This paper aims to investigate the stability of money demand function for Saudi Arabian economy over the period of 2007:Q1-2018:Q4 by applying various structural break tests. The obtained results from the utilized tests reveal the stability of money demand function. The estimated money demand function also shows the impact of income on money demand is consistent with theory expectations in addition to the positive impact of exchange rate and interest rate on the demand for money. Moreover, the estimated error correction model indicates that money demand needs about 5 quarters to adjust to its equilibrium path in case it deviates from the steady state condition.

Suggested Citation

  • Moayad H. Al Rasasi, 2020. "Assessing the Stability of Money Demand Function in Saudi Arabia," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 6(2), pages 22-28, 02-2020.
    • Handle: RePEc:arp:ijefrr:2020:p:22-28
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    References listed on IDEAS

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