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How stable is the demand for money in African countries?

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  • Mohsen Bahmani-Oskooee
  • Abera Gelan

Abstract

Purpose – Studies that have addressed the stability of the demand for money in African countries are rare. A few papers have addressed the issue in a small number of individual countries. For cross-country comparison, this paper aims to investigate the stability of the M2 demand for money in 21 African countries using quarterly data over the period 1971Q1-2004Q3. Design/methodology/approach – A standard money demand function is designed. It is estimated using a bounds testing approach to co-integration and error-correction modeling. Findings – Application of the CUSUM and CUSUMSQ tests to the residuals of error-correction models reveals that in almost all 21 countries, M2 demand for money is stable. This could be due to incorporating the short-run adjustment process in testing for the stability of the long-run elasticity estimates. Research limitations/implications – Due to data limitations, the study could not be extended to all countries in Africa. Originality/value – This is the most comprehensive study in the literature for Africa.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal Journal of Economic Studies.

Volume (Year): 36 (2009)
Issue (Month): 3 (September)
Pages: 216-235

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Handle: RePEc:eme:jespps:v:36:y:2009:i:3:p:216-235

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Related research

Keywords: Africa; Demand; Money;

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Citations

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Cited by:
  1. Arto Kovanen, 2011. "Does Money Matter for Inflation in Ghana?," IMF Working Papers 11/274, International Monetary Fund.
  2. Saten Kumar & Mamta B. Chowdhury & B. Bhaskara Rao, 2013. "Demand for money in the selected OECD countries: a time series panel data approach and structural breaks," Applied Economics, Taylor & Francis Journals, vol. 45(14), pages 1767-1776, May.
  3. Bahmani-Oskooee, Mohsen & Xi, Dan, 2012. "Exchange rate volatility and domestic consumption: Evidence from Japan," Economic Systems, Elsevier, vol. 36(2), pages 326-335.
  4. Saten Kumar & Don J. Webber & Scott Fargher, 2011. "Money demand stability: A case study of Nigeria," Working Papers 2011-02, Auckland University of Technology, Department of Economics.
  5. Arto Kovanen & Jihad Dagher, 2011. "On the Stability of Money Demand in Ghana," IMF Working Papers 11/273, International Monetary Fund.
  6. Mohsen Bahmani-Oskooee & Sahar Bahmani, 2014. "Monetary Uncertainty and Demand for Money in Korea," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(3), pages 317-324, March.
  7. Bahmani-Oskooee, Mohsen & Harvey, Hanafiah & Hegerty, Scott W., 2014. "Industry trade and exchange-rate fluctuations: Evidence from the U.S. and Chile," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 619-626.
  8. Bahmani-Oskooee, Mohsen & Bolhassani, Marzieh & Hegerty, Scott W., 2010. "The effects of currency fluctuations and trade integration on industry trade between Canada and Mexico," Research in Economics, Elsevier, vol. 64(4), pages 212-223, December.

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