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Structural Breaks and the Demand for Money in Fiji

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  • Rao, B. Bhaskara
  • Kumar, Saten

Abstract

This paper fills a gap in the empirical work on the demand for money for Fiji. We allowed for structural breaks in the cointegrating equation, within the Gregory and Hansen framework, and found that there is a cointegrating relationship between real narrow money, real income and the nominal rate of interest in all the three types of their models. However, only the model with an intercept shift for the 1987 political coup yields a meaningful cointegrating relationship. We tested for its temporal stability and found that the demand for money in Fiji is stable.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1549.

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Date of creation: Jul 2006
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Handle: RePEc:pra:mprapa:1549

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Keywords: Structural break; Cointegration; Gregory and Hansen; Demand for money; Fiji;

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  1. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
  2. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
  3. William Poole, 1969. "Optimal choice of monetary policy instruments in a simple stochastic macro model," Special Studies Papers 2, Board of Governors of the Federal Reserve System (U.S.).
  4. Mohsen Bahmani-Oskooee & Hafez Rehman, 2005. "Stability of the money demand function in Asian developing countries," Applied Economics, Taylor & Francis Journals, vol. 37(7), pages 773-792.
  5. Saten Kumar, 2011. "Cointegration and the demand for energy in Fiji," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 35(1), pages 85-97.
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Cited by:
  1. Kumar, Saten & Manoka, Billy, 2008. "Testing the Stability of Demand for Money in Tonga," MPRA Paper 19300, University Library of Munich, Germany.

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