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Dynamic Analysis of Money Demand Function: Case of Turkey

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  • doğru, bülent

Abstract

In this paper, the dynamic determinants of money demand function and the long-run and short-run relationships between money demand, income and nominal interest rates are examined in Turkey for the time period 1980-2012. In particular we estimate a dynamic specification of a log money demand function based on Keynesian liquidity preference theory to ascertain the relevant elasticity of money demand. The empirical results of the study show that in Turkey inflation, exchange rate and money demand are co-integrated, i.e., they converge to a long run equilibrium point, and money demand function in Turkey.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 48402.

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Date of creation: 15 Jan 2013
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Handle: RePEc:pra:mprapa:48402

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Keywords: Dynamic Ordinary Least Squares; Vector Error Correction; Money Demand Function;

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  1. Chen, Show-Lin & Wu, Jyh-Lin, 2005. "Long-run money demand revisited: evidence from a non-linear approach," Journal of International Money and Finance, Elsevier, Elsevier, vol. 24(1), pages 19-37, February.
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  3. Park, Joon Y & Phillips, Peter C B, 2001. "Nonlinear Regressions with Integrated Time Series," Econometrica, Econometric Society, Econometric Society, vol. 69(1), pages 117-61, January.
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  12. Laurence Ball, 1998. "Another Look at Long-Run Money Demand," NBER Working Papers 6597, National Bureau of Economic Research, Inc.
  13. Park, Joon Y. & Phillips, Peter C.B., 1999. "Asymptotics For Nonlinear Transformations Of Integrated Time Series," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 15(03), pages 269-298, June.
  14. Baba, Yoshihisa & Hendry, David F & Starr, Ross M, 1992. "The Demand for M1 in the U.S.A., 1960-1988," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 59(1), pages 25-61, January.
  15. Mehra, Yash P, 1993. "The Stability of the M2 Demand Function: Evidence from an Error-Correction Model," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 25(3), pages 455-60, August.
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  18. Kevin Nell, 2003. "The Stability of M3 Money Demand and Monetary Growth Targets: The Case of South Africa," Journal of Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 39(3), pages 155-180.
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