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Demand for Real Money Balances by the Business Sector: An Econometric Investigation

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Author Info
Qayyum, Abdul

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Abstract

The objective of this paper has been to estimate dynamic demand for money function for the business sector in Pakistan. It is found that the individual time series of the variables included in the money demand function are not stationary. They are integrated of order one. Further it is concluded that the one cointegration relationship between money demand and its determinants. The rate of inflation emerged as important determinant of real money balances demand by the business sector. In the long run business sector give no importance to the rate of interest while holding money.We have estimated dynamic stable money demand functions, which have remarkably good predictive power. In the short run rate of interest on saving deposit emerged an important determinant of money demand by the business sector. The previous money demand behaviour also plays an important role in the determination of current behaviour.

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File URL: http://mpra.ub.uni-muenchen.de/2156/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2156.

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Date of creation: 2000
Date of revision: 2000
Publication status: Published in The Pakistan Development Review 4.39(2000): pp. 857-873
Handle: RePEc:pra:mprapa:2156

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Related research
Keywords: Money demand business sector Unit root Cointegration Pakistan

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Find related papers by JEL classification:
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Hendry, David F. & Pagan, Adrian R. & Sargan, J.Denis, 1984. "Dynamic specification," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 18, pages 1023-1100 Elsevier. [Downloadable!] (restricted)
  2. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June. [Downloadable!] (restricted)
  3. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March. [Downloadable!] (restricted)
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  4. Ungar, Meyer & Zilberfarb, Benzion, 1980. " The Demand for Money by Firms: The Stability and Other Issues Reexamined," Journal of Finance, American Finance Association, vol. 35(3), pages 779-85, June. [Downloadable!] (restricted)
  5. Stock, James H, 1987. "Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors," Econometrica, Econometric Society, vol. 55(5), pages 1035-56, September. [Downloadable!] (restricted)
  6. Granger, C. W. J., 1981. "Some properties of time series data and their use in econometric model specification," Journal of Econometrics, Elsevier, vol. 16(1), pages 121-130, May. [Downloadable!] (restricted)
  7. Qayyum, Abdul, 1999. "Demand for Money By Business Sector in a Developing Country: Evidence from Pakistan," MPRA Paper 2583, University Library of Munich, Germany, revised 0199. [Downloadable!]
  8. Wilbratte, Barry J, 1975. "Some Essential Differences in the Demand for Money by Households and by Firms," Journal of Finance, American Finance Association, vol. 30(4), pages 1091-99, September. [Downloadable!] (restricted)
  9. Bera, Anil K. & Jarque, Carlos M., 1982. "Model specification tests : A simultaneous approach," Journal of Econometrics, Elsevier, vol. 20(1), pages 59-82, October. [Downloadable!] (restricted)
  10. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
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  1. Khan, Muhammad Arshad & Sajjid, Muhammad Zabir, 2005. "The Exchange Rates and Monetary Dynamics in Pakistan: An Autoregressive Distributed Lag (ARDL) Apporach," MPRA Paper 6752, University Library of Munich, Germany. [Downloadable!]
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