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A stable demand for money despite financial crisis: The case of Venezuela

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Author Info
C. Bjørnland, Hilde (Dept. of Economics, University of Oslo)

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Abstract

This paper investigates the demand for broad money in Venezuela, over a period of financial crisis and substantial exchange rate fluctuations. The analysis shows that there exist a long run relationship between real money, real income, inflation, the exchange rate and the domestic interest rate, that remains stable over major policy changes and large shocks. The long run properties emphasize that both inflation and exchange rate depreciations have negative effects on real money demand. The long run relationship is embedded in a dynamic equilibrium correction model with constant parameters.

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File URL: http://www.oekonomi.uio.no/memo/memopdf/memo1203.pdf
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Publisher Info
Paper provided by Oslo University, Department of Economics in its series Memorandum with number 12/2003.

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Length: 19 pages
Date of creation: 14 Mar 2003
Date of revision:
Handle: RePEc:hhs:osloec:2003_012

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Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
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Web page: http://www.oekonomi.uio.no/indexe.html
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Related research
Keywords: Money demand; open economy; cointegration; dynamic specifications; equilibrium correction models;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

References listed on IDEAS
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  1. McKinnon, Ronald I, 1982. "Currency Substitution and Instability in the World Dollar Standard," American Economic Review, American Economic Association, vol. 72(3), pages 320-33, June. [Downloadable!] (restricted)
  2. David F. Hendry & Neil R. Ericsson, 1990. "Modeling the demand for narrow money in the United Kingdom and the United States," International Finance Discussion Papers 383, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  3. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-72, August.
  4. Girton, Lance & Roper, Don E, 1981. "Theory and Implications of Currency Substitution," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 13(1), pages 12-30, February. [Downloadable!] (restricted)
  5. Sunil Sharma & Neil R. Ericsson, 1996. "Broad Money Demand and Financial Liberalization in Greece," IMF Working Papers 96/62, International Monetary Fund.
    Other versions:
  6. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November. [Downloadable!] (restricted)
  7. Ortiz, Guillermo, 1983. "Currency Substitution in Mexico: The Dollarization Problem," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(2), pages 174-85, May. [Downloadable!] (restricted)
  8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
  9. Bahmani-Oskooee, Mohsen & Malixi, Margaret, 1991. "Exchange Rate Sensitivity of the Demand for Money in Developing Countries," Applied Economics, Taylor and Francis Journals, vol. 23(8), pages 1377-83, August.
  10. Marquez, Jaime, 1987. "Money demand in open economies: A currency substitution model for Venezuela," Journal of International Money and Finance, Elsevier, vol. 6(2), pages 167-178, June. [Downloadable!] (restricted)
  11. Neil R. Ericsson, 1998. "Empirical modeling of money demand," Empirical Economics, Springer, vol. 23(3), pages 295-315. [Downloadable!] (restricted)
  12. McNown, Robert & Wallace, Myles S., 1992. "Cointegration tests of a long-run relation between money demand and the effective exchange rate," Journal of International Money and Finance, Elsevier, vol. 11(1), pages 107-114, February. [Downloadable!] (restricted)
  13. Arango, Sebastian & Ishaq Nadiri, M., 1981. "Demand for money in open economies," Journal of Monetary Economics, Elsevier, vol. 7(1), pages 69-83. [Downloadable!] (restricted)
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