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Money supply behaviour in emerging economies: a comparative analysis

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  • Zatul Badarudin
  • Ahmed Khalid
  • Mohamed Ariff

Abstract

This paper reports new evidence consistent with the post-Keynesian hypothesis of money endogeneity for hitherto unexplored 10 emerging economies. These results were obtained using a vector error correction model to test for long-run and short-run causalities with data from 1996 to 2007. The evidence suggests that money supply is endogenous in five countries, namely China, the Czech Republic, India, Malaysia and Turkey; it is exogenous in Mexico, while there was no causality found in Indonesia, Russia and Taiwan. Thailand showed endogeneity in the long-run causality. Some suggestions are made to explain the mixed results, and we also discuss the limitations arising from our narrow specifications of the money supply and the models.

Suggested Citation

  • Zatul Badarudin & Ahmed Khalid & Mohamed Ariff, 2009. "Money supply behaviour in emerging economies: a comparative analysis," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 14(4), pages 331-350.
    • Handle: RePEc:taf:rjapxx:v:14:y:2009:i:4:p:331-350
    DOI: 10.1080/13547860903169324
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    References listed on IDEAS

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    1. Ya-Hwei Yang & Jia-Dong Shea, 2005. "Deflation and Monetary Policy in Taiwan," NBER Working Papers 11244, National Bureau of Economic Research, Inc.
    2. Mohamed Ariff & Ahmed M. Khalid, 2005. "Liberalization and Growth in Asia," Books, Edward Elgar Publishing, number 2909.
    3. Cifter, Atilla & Ozun, Alper, 2007. "Estimating the Effects of Interest Rates on Share Prices Using Multi-scale Causality Test in Emerging Markets: Evidence from Turkey," MPRA Paper 2485, University Library of Munich, Germany.
    4. Peter Howells, 2007. "The Demand for Endogenous Money: A Lesson in Institutional Change," Working Papers 0701, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
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    1. Badarudin, Z.E. & Ariff, M. & Khalid, A.M., 2013. "Post-Keynesian money endogeneity evidence in G-7 economies," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 146-162.
    2. Z. E. Badarudin & M. Ariff & A. M. Khalid, 2011. "Money supply endogeneity and bank stock returns," Applied Financial Economics, Taylor & Francis Journals, vol. 21(14), pages 1035-1048.
    3. Lee, Chien Chiang & Chang, Chun Ping, 2012. "The Demand for Money in China: A Reassessment Using the Bounds Testing Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 74-94, March.
    4. Liu, Taoxiong & Huang, Mengdan, 2016. "Land supply and money growth in China," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 327-338.
    5. Trunin, P. & Vashchelyuk, N., 2015. "The Analysis of Money Supply Endogeneity in Russia," Journal of the New Economic Association, New Economic Association, vol. 25(1), pages 103-131.
    6. Vadim O. Grishchenko & Alexander Mihailov & Vasily N. Tkachev, 2021. "Money Creation in Russia: Does the Money Multiplier Exist?," Economics Discussion Papers em-dp2021-15, Department of Economics, University of Reading.
    7. Bozhechkova Alexandra & Trunin Pavel & Sinelnikova-Muryleva Elena & Petrova Diana & Chentsov Alexander, 2018. "Building of monetary and currency markets models," Research Paper Series, Gaidar Institute for Economic Policy, issue 175P, pages 1-96.

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