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Estimating Money Demand Function in Cambodia: ARDL Approach

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  • Samreth, Sovannroeun

Abstract

This paper empirically estimates the money demand function in Cambodia. We adopt the money demand model that includes exchange rate. For the analysis, Autoregressive Distributed Lag (ARDL) approach to cointegration is employed. Our results indicate that there is cointegration among variables in money demand function. CUSUM and CUSUMSQ tests roughly support the stability of estimated model. However, in the long-run, even the sign of estimated coefficient of exchange rate support the currency substitution phenomenon in Cambodia, it fails t-test. This may be due to the mix of both currency substitution and wealth effects in the long-run.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16274.

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Date of creation: 2008
Date of revision: Jun 2009
Handle: RePEc:pra:mprapa:16274

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Related research

Keywords: Money Demand; M1; Cambodia; Currency Substitution;

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References

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  1. Kiwon Kang, 2005. "Is Dollarization Good for Cambodia?," Global Economic Review, Taylor & Francis Journals, vol. 34(2), pages 201-211.
  2. Santi Chaisrisawatsuk & Subhash Sharma & Abdur Chowdhury, 2004. "Money demand stability under currency substitution: some recent evidence," Applied Financial Economics, Taylor & Francis Journals, vol. 14(1), pages 19-27.
  3. Franziska Ohnsorge & Nienke Oomes, 2005. "Money Demand and Inflation in Dollarized Economies," IMF Working Papers 05/144, International Monetary Fund.
  4. Bahmani-Oskooee, Mohsen, 1996. "The black market exchange rate and demand for money in Iran," Journal of Macroeconomics, Elsevier, vol. 18(1), pages 171-176.
  5. Bahmani-Oskooee, Mohsen & Techaratanachai, Ampa, 2001. "Currency substitution in Thailand," Journal of Policy Modeling, Elsevier, vol. 23(2), pages 141-145, February.
  6. Bahmani-Oskooee, Mohsen & Tanku, Altin, 2006. "Black market exchange rate, currency substitution and the demand for money in LDCs," Economic Systems, Elsevier, vol. 30(3), pages 249-263, October.
  7. Sovannroeun Samreth, 2010. "Currency substitution and seigniorage-maximizing inflation: the case of Cambodia," Applied Economics, Taylor & Francis Journals, vol. 42(15), pages 1907-1916.
  8. Hoffman, Dennis L. & Rasche, Robert H. & Tieslau, Margie A., 1995. "The stability of long-run money demand in five industrial countries," Journal of Monetary Economics, Elsevier, vol. 35(2), pages 317-339, April.
  9. International Monetary Fund, 2002. "Macroeconomic Adjustment in a Highly Dollarized Economy," IMF Working Papers 02/92, International Monetary Fund.
  10. Akinlo, A. Enisan, 2006. "The stability of money demand in Nigeria: An autoregressive distributed lag approach," Journal of Policy Modeling, Elsevier, vol. 28(4), pages 445-452, May.
  11. Gregory C. Chow, 1966. "On the Long-Run and Short-Run Demand for Money," Journal of Political Economy, University of Chicago Press, vol. 74, pages 111.
  12. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  13. Oomes, Nienke & Ohnsorge, Franziska, 2005. "Money demand and inflation in dollarized economies: The case of Russia," Journal of Comparative Economics, Elsevier, vol. 33(3), pages 462-483, September.
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Cited by:
  1. Birendra Bahadur Budha, 2011. "An Empirical Analysis of Money Demand Function in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 23(1), pages 54-70, April.
  2. Nikolaos Dritsakis, 2011. "Demand for Money in Hungary: An ARDL Approach," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 01-16, November.
  3. Kyophilavong, Phouphet & Shahbaz, Muhammad & Salah Uddin, Gazi, 2013. "Does J-Curve Phenomenon Exist in Case of Laos? An ARDL Approach," MPRA Paper 49052, University Library of Munich, Germany, revised 12 Aug 2013.
  4. Bhatta, Siddha Raj, 2011. "Stability of demand for money function in Nepal: A cointegration and error correction modeling approach," MPRA Paper 41404, University Library of Munich, Germany.

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