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The Demand for Money in A Small Island Economy : The Case of Barbados

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Author Info

  • Michael Howard

    (Department of Economics, University of the West Indies Cave Hill Campus, P.O. Box 64, St. Micheal, Barbados)

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    Abstract

    This study estimates the demand for real money balances in Barbados for the period 1973 - 1998. The paper employs a cointegration and error correction modelling (ECM) approach. The results show that the demand for real money is a function of real income, inflation and the error correction mechanism. This means that real money balance holders restore these balances to the long-run relationship whenever they are in a short-run disequilibrium position. Inflation is exogenous in the money demand function. The policy implication of this finding is that the monetary authorities cannot control the inflation rate in a demand-centered money market.

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    Bibliographic Info

    Article provided by Department of Economics, Delhi School of Economics in its journal Indian Economic Review.

    Volume (Year): 37 (2002)
    Issue (Month): 2 (July)
    Pages: 199-208

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    Handle: RePEc:dse:indecr:v:37:y:2002:i:2:p:199-208

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    Related research

    Keywords: Money demand; Cointegration; Exogeneity; Small Economy;

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