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Money demand function: a heterogeneous panel application

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  • Nasri Harb

Abstract

An aggregate data panel is constructed for the GCC's six countries and the cointegration hypothesis among the variables of the money demand function is verified using Pedroni's heterogeneous panel cointegration tests. The idiosyncratic, panel and group-mean cointegrating vectors are then estimated using FMOLS and a modified version of FMOLS developed by Pedroni. The idiosyncratic elasticities have the expected signs in general but are significant only in the case of the scale variable. However, when the power of the test is increased, and allowance made for heterogeneous cointegrating vectors, the group-mean estimator shows a significant negative semi-elasticity of money demand with respect to interest rate.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 11 (2004)
Issue (Month): 9 ()
Pages: 551-555

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Handle: RePEc:taf:apeclt:v:11:y:2004:i:9:p:551-555

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Cited by:
  1. Nasri Harb, 2007. "Trade between Euro zone and Arab countries: a panel study," Applied Economics, Taylor & Francis Journals, vol. 39(16), pages 2099-2107.
  2. Kumar, Saten & Chowdhury, Mamta & Rao, B. Bhaskara, 2010. "Demand for Money in the Selected OECD Countries: A Time Series Panel Data Approach and Structural Breaks," MPRA Paper 22204, University Library of Munich, Germany.
  3. Frauke Dobnik, 2013. "Long-run money demand in OECD countries: what role do common factors play?," Empirical Economics, Springer, vol. 45(1), pages 89-113, August.
  4. Darrat, Ali F. & Al-Sowaidi, Saif S., 2009. "Financial progress and the stability of long-run money demand: Implications for the conduct of monetary policy in emerging economies," Review of Financial Economics, Elsevier, vol. 18(3), pages 124-131, August.
  5. Westerlund, Joakim & Basher, Syed A., 2007. "Mixed Signals Among Tests for Panel Cointegration," MPRA Paper 3261, University Library of Munich, Germany.
  6. GARCIA-HIERNAUX, Alfredo & CERNO, Leonel, 2006. "Empirical Evidence For A Money Demand Function: A Panel Data Analysis Of 27 Countries In 1988-98," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(1).
  7. Frauke Dobnik, 2011. "OLong-run Money Demand in OECD Countries – Cross-Member Cointegration," Ruhr Economic Papers 0237, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  8. Syed Basher & Stefano Fachin, 2012. "Investigating Long-Run Demand for Broad Money in the Gulf Arab Countries," DSS Empirical Economics and Econometrics Working Papers Series 2012/6, Centre for Empirical Economics and Econometrics, Department of Statistics, "Sapienza" University of Rome.
  9. Gerlach-Kristen, Petra & O'Connell, Brian & O'Toole, Conor, 2013. "How do banking crises affect aggregate consumption? Evidence from international crisis episodes," Papers WP464, Economic and Social Research Institute (ESRI).
  10. Abdulnasser Hatemi-J & Manuchehr Irandoust, 2006. "The response of industry employment to exchange rate shocks: evidence from panel cointegration," Applied Economics, Taylor & Francis Journals, vol. 38(4), pages 415-421.
  11. Hernández Monsalve, Mauricio A. & Posada Posada, Carlos Esteban, 2006. "La demanda por dinero en Colombia: un poco más de evidencia en el período reciente," PERFIL DE COYUNTURA ECONÓMICA, UNIVERSIDAD DE ANTIOQUIA - CIE.

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