Money Demand Function: A heterogeneous Panel Application
AbstractWe construct an aggregate data panel for the GCC's six countries and verify the cointegration hypothesis among the variables of the money demand function using Pedroni's heterogeneous panel cointegration tests (2001). Then, we estimate the idiosyncratic, panel and group-mean cointegrating vectors using FMOLS and a modified version of FMOLS developed by Pedroni (2000). We find strong evidence of cointegration amongst our variables. The estimated elasticities have the expected signs in general but are significant only in the case of the scale variable. Unlike previous studies, we find a significant negative the semi elasticity of money demand with respect to interest rate when we allow for heterogeneity amongst our panel's members.
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Bibliographic InfoPaper provided by Department of Economics, College of Business and Economics, UAE University in its series Economics Working Papers with number 03/04-01.
Length: 22 pages
Date of creation: Oct 2003
Date of revision:
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Demand; Time series; Panel Cointegration; FMOLS;
Other versions of this item:
- Nasri Harb, 2004. "Money demand function: a heterogeneous panel application," Applied Economics Letters, Taylor and Francis Journals, vol. 11(9), pages 551-555.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-03-14 (All new papers)
- NEP-CWA-2004-03-14 (Central & Western Asia)
- NEP-MAC-2004-03-14 (Macroeconomics)
- NEP-MON-2004-03-14 (Monetary Economics)
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