Demand for Real Money Balances by the Business Sector: An Econometric Investigation
AbstractThe 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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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 2156.
Date of creation: 2000
Date of revision: 2000
Publication status: Published in The Pakistan Development Review 4.39(2000): pp. 857-873
Money demand; business sector; Unit root; Cointegration; Pakistan;
Other versions of this item:
- Abdul Qayyum, 2000. "Demand for Real Money Balances by the Business Sector: An Econometric Investigation," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 39(4), pages 857-873.
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
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