Modeling the Demand for Currency Issued in Turkey
AbstractThe purpose of this study is to investigate the empirical relationship between real money balances, real income, and the opportunity cost variables in Turkey using quarterly data between the periods 1987Q1-2003Q3. The estimation results reveal that long run demand for real cash balances depends on real income, interest rate on government securities and the exchange rate. The long run elasticity of income is close to one with the opportunity cost variables carrying the expected signs. Based on the cointegration and the weak exogeneity test results, single equation error correction model is specified and estimated. The estimated models disclose the fact that the income and the interest rate effects is much smaller in the short run than the long run, whereas exchange rate influence is more pronounced in the short run.
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Bibliographic InfoArticle provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its journal Central Bank Review.
Volume (Year): 3 (2003)
Issue (Month): 1 ()
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Money Demand; Cointegration; Error Correction Modelling;
Find related papers by JEL classification:
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
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