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Asymmetrical effects of real exchange rate on the money demand in Saudi Arabia: A non-linear ARDL approach

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  • Haider Mahmood
  • Tarek Tawfik Yousef Alkhateeb

Abstract

This present research investigates the money demand function of Saudi Arabia using a long period 1968–2016. In addition, the asymmetrical effects of real exchange rate changes have also been explored in the estimated money demand function. Our empirical results suggest that income and inflation have positive and negative effects on money demand respectively. Further, a real appreciation of US dollar has a positive effect but a real depreciation has a negative effect on the money demand. Furthermore, income and price homogeneity hypotheses do not hold for the estimated elasticities. Moreover, the estimated model is found stable with the theoretically expected effects of money demand’s determinants. Therefore, we are suggesting money supply as a monetary policy instrument to the economy of Saudi Arabia.

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  • Haider Mahmood & Tarek Tawfik Yousef Alkhateeb, 2018. "Asymmetrical effects of real exchange rate on the money demand in Saudi Arabia: A non-linear ARDL approach," PLOS ONE, Public Library of Science, vol. 13(11), pages 1-12, November.
    • Handle: RePEc:plo:pone00:0207598
    DOI: 10.1371/journal.pone.0207598
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    5. Mahmood, Haider, 2020. "Level of Education and Renewable Energy Consumption Nexus in Saudi Arabia," MPRA Paper 109141, University Library of Munich, Germany.
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    7. Tanveer, Muhammad & Hassan, Shafiqul & Mahmood, Haider & Khan, Syed Abdul Rehman, 2021. "The Use of Social Media by Managers During the Pandemic to Accomplish the Tasks," MPRA Paper 109249, University Library of Munich, Germany.
    8. Lee-Chea Hiew & Chin-Hong Puah & Mohammad Affendy Arip & Mei-Teing Chong, 2019. "Role of Advertising Expenditure as an Influential Non-traditional Regressor in Russia¡¯s Money Demand Specification," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(6), pages 232-240, October.
    9. Mahmood, Haider, 2020. "Impact of financial market development on the CO2 Emissions in GCC countries," MPRA Paper 109134, University Library of Munich, Germany.
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