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What Determines the Demand for Money in the Asian-Pacific Countries? An Empirical Panel Investigation

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Author Info
Valadkhani, Abbas () (University of Wollongong)
Abstract

This paper examines the long- and short-run determinants of the demand for money in six countries in the Asian-Pacific region using panel data (1975-2002). Various country-specific coefficients are allowed to capture inter-country heterogeneities. Consistent with theoretical postulates, it is found that (a) the demand for money in the long-run positively responds to real income and inversely to the interest rate spread, inflation, the real effective exchange rate, and the US real interest rate; (b) the long-run income elasticity is greater than unity; and (c) both the currency substitution and capital mobility hypotheses hold only in the long run.

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File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow012224.pdf
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Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp06-11.

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Length: 12 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:uow:depec1:wp06-11

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Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
Phone: +612 4221-3663
Fax: +612 4221-3725
Web page: http://www.uow.edu.au/commerce/econ/
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Related research
Keywords: Demand for Money; Money and Interest Rate Spread; Panel Data;

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Find related papers by JEL classification:
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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References listed on IDEAS
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    Other versions:
  4. Pierre L. Siklos & Andrew G. Barton, 2001. "Monetary aggregates as indicators of economic activity in Canada: empirical evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 34(1), pages 1-17, February. [Downloadable!] (restricted)
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  6. Peter Wickham & Carmen Reinhart & Jose De Gregorio & Patricio Arrau, 1991. "The Demand for Money in Developing Countries: Assessing the Role of Financial Innovation," IMF Working Papers 91/45, International Monetary Fund.
    Other versions:
  7. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July. [Downloadable!] (restricted)
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  8. Felmingham, Bruce & Zhang, Qing, 2001. "The Long Run Demand For Broad Money in Australia Subject to Regime Shifts," Australian Economic Papers, Blackwell Publishing, vol. 40(2), pages 146-55, June. [Downloadable!] (restricted)
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    Other versions:
  13. Robert Simmons, 1992. "An Error-correction Approach to Demand for Money in Five African Developing Countries," Journal of Economic Studies, Emerald Group Publishing, vol. 19(1), pages 29-47, January. [Downloadable!] (restricted)
  14. Mohsen Bahmani-Oskooee & Hyun-Jae Rhee, 1994. "Long-Run Elasticities Of The Demand For Money In Korea: Evidence From Cointegration Analysis," International Economic Journal, Korean International Economic Association, vol. 8(2), pages 83-93, June. [Downloadable!] (restricted)
  15. Agenor, Pierre-Richard & Khan, Mohsin S., 1996. "Foreign currency deposits and the demand for money in developing countries," Journal of Development Economics, Elsevier, vol. 50(1), pages 101-118, June. [Downloadable!] (restricted)
  16. Ball, Laurence, 2001. "Another look at long-run money demand," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 31-44, February. [Downloadable!] (restricted)
    Other versions:
  17. Abdur Chowdhury, 1995. "The demand for money in a small open economy: The case of Switzerland," Open Economies Review, Springer, vol. 6(2), pages 131-144, April. [Downloadable!] (restricted)
  18. Laidler, David, 1991. "The Quantity Theory Is Always and Everywhere Controversial--Why?," The Economic Record, The Economic Society of Australia, vol. 67(199), pages 289-306, December.
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