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Money demand stability: A case study of Nigeria

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  • Saten Kumar

    (Department of Business Economics, Auckland University of Technology)

  • Don J. Webber

    ()
    (Department of Business Economics, Auckland University of Technology and Department of Economics, UWE, Bristol)

  • Scott Fargher

    (Department of Business Economics, Auckland University of Technology)

Abstract

This paper presents an empirical investigation into the level and stability of money demand (M1) in Nigeria between 1960 and 2008. In addition to estimating the canonical specification, alternative specifications are presented that include additional variables to proxy for the cost of holding money. Results suggest that the canonical specification is well-determined, the money demand relationship went through a regime shift in 1986 which slightly improved the scale economies of money demand, and money demand is stable. These findings imply that Nigeria could effectively use the supply of money as an instrument of monetary policy.

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Bibliographic Info

Paper provided by Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol in its series Working Papers with number 1015.

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Length: 16 pages
Date of creation: Oct 2010
Date of revision:
Handle: RePEc:uwe:wpaper:1015

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Keywords: Money demand; Structural breaks; Cointegration; Monetary policy;

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References

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Cited by:
  1. Kumar, Saten & Sen, Rahul & Srivastava, Sadhana, 2014. "Does economic integration stimulate capital mobility? An analysis of four regional economic communities in Africa," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 29(C), pages 33-50.

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