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The Demand for Money in Transition Economies

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  • Ozturk, Ilhan

    ()
    (Faculty of Economics and Administrative Sciences, Cag University, 33800, Mersin, Turkey.)

  • Acaravci, Ali

    ()
    (Faculty of Economics and Administrative Sciences, Mustafa Kemal University, Antakya-Hatay, Turkey)

Abstract

This paper examines the long-run determinants of the demand for money in ten transition countries using panel data for the 1994-2005 period. Using panel unit root tests we rejected the the null hypothesis of the nonstationarity and employed the feasible generalized least squares (FGLS) model. Consistent with theoretical postulates, it is found that (a) the demand for money in the long-run positively responds to real GDP and inversely to the inflation and the real effective exchange rate and (b) the long-run income elasticity is about unity.

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Bibliographic Info

Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): 5 (2008)
Issue (Month): 2 (June)
Pages: 35-43

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Handle: RePEc:rjr:romjef:v:5:y:2008:i:2:p:35-43

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Keywords: demand for money; transition economies; panel unit root test; feasible GLS;

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References

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  1. Laidler, David, 1999. "The Quantity of Money and Monetary Policy," Working Papers 99-5, Bank of Canada.
  2. Abdur Chowdhury, 1995. "The demand for money in a small open economy: The case of Switzerland," Open Economies Review, Springer, vol. 6(2), pages 131-144, April.
  3. Valadkhani, Abbas, 2006. "What Determines the Demand for Money in the Asian-Pacific Countries? An Empirical Panel Investigation," Economics Working Papers wp06-11, School of Economics, University of Wollongong, NSW, Australia.
  4. Neil R. Ericsson, 1998. "Empirical modeling of money demand," Empirical Economics, Springer, vol. 23(3), pages 295-315.
  5. Agenor, Pierre-Richard & Khan, Mohsin S., 1996. "Foreign currency deposits and the demand for money in developing countries," Journal of Development Economics, Elsevier, vol. 50(1), pages 101-118, June.
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  7. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  8. Naoko Hamori & Shigeyuki Hamori, 1999. "Stability of the money demand function in Germany," Applied Economics Letters, Taylor & Francis Journals, vol. 6(5), pages 329-332.
  9. Subramanian S. Sriram, 1999. "Survey of Literatureon Demand for Money," IMF Working Papers 99/64, International Monetary Fund.
  10. Ferda Halicioglu & Mehmet Ugur, 2005. "On stability of the demand for money in a developing OECD country: the case of Turkey," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 7(2/3), pages 203-213.
  11. Gupta, K. L. & Moazzami, B., 1989. "Demand for money in Asia," Economic Modelling, Elsevier, vol. 6(4), pages 467-473, October.
  12. Pradhan, Basanta K. & Subramanian, A., 2003. "On the stability of demand for money in a developing economy: Some empirical issues," Journal of Development Economics, Elsevier, vol. 72(1), pages 335-351, October.
  13. Kevin Nell, 2003. "The Stability of M3 Money Demand and Monetary Growth Targets: The Case of South Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 39(3), pages 155-180.
  14. Claudia Buch, 2001. "Money demand in Hungary and Poland," Applied Economics, Taylor & Francis Journals, vol. 33(8), pages 989-999.
  15. Pierre L. Siklos & Andrew G. Barton, 2001. "Monetary aggregates as indicators of economic activity in Canada: empirical evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 34(1), pages 1-17, February.
  16. Gunter Coenen & Juan Luis Vega, 2000. "The Demand for M3 in the Euro Area," Econometric Society World Congress 2000 Contributed Papers 0976, Econometric Society.
  17. Juan Luis Vega, 1998. "Money demand stability: Evidence from Spain," Empirical Economics, Springer, vol. 23(3), pages 387-400.
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Cited by:
  1. Daniela Zapodeanu & Mihail Ioan Cociuba, 2010. "Linking Money Supply With The Gross Domestic Product In Romania," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(12), pages 50.

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