Money Demand in Romania
AbstractFinding a stable money demand relationship is considered essential for the formulation and conduction of an efficient monetary policy. Consequently, numerous theoretical and empirical studies have been conducted in both developed and developing countries to evaluate the determinants and the stability of the demand for money function for various monetary aggregates. This paper briefly reviews the theoretical work, tracing the contributions of several researchers beginning from the classical economists, and explains relevant empirical issues in modelling and estimating money demand function for Romania. The paper models the empirical relationship between broader definition of money, output, interest rates, inflation and exchange rate in Romania and examines the constancy of this relationship, especially in the light of financial reform and deregulation of financial markets. The demand for broad money in Romania has been stable between 1996 and 2002 despite of a pronounced financial liberalization. The analysis suggests that, in Romania in the long run the inflation is weakly exogenous for the money demand, which means that inflation is not a monetary phenomenon.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 10629.
Date of creation: 15 Jun 2002
Date of revision:
money demand; cointegration; monetary targeting;
Find related papers by JEL classification:
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
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