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A Cointegration And Error Correction Approach To Demand For Money In Fiji: 1971-2002

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Author Info
B Bhaskara Rao (University of the South Pacific)
Rup Singh (University of the South Pacific)

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Abstract

Demand for money is an important macroeconomic relationship. Its stability has implications for the choice of monetary policy targets. This paper estimates demand for narrow money in Fiji and evaluates its robustness and stability. It is found that there is a well determined stable demand for money in Fiji, for three decades, from 1971 to 2002 and its dynamics are adequately captured by the cointegration and error- correction models. Income and interest rate elasticities are found to be significant.

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Paper provided by EconWPA in its series Macroeconomics with number 0511012.

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Length: 20 pages
Date of creation: 11 Nov 2005
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Handle: RePEc:wpa:wuwpma:0511012

Note: Type of Document - pdf; pages: 20
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Web page: http://129.3.20.41

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Related research
Keywords: Demand for money; Monetary policy; Income and interest rate elasticities; Cointegration; Error correction; Unit roots; Stability.;

Find related papers by JEL classification:
C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General
C5 - Mathematical and Quantitative Methods - - Econometric Modeling

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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. Subramanian S. Sriram, 1999. "Survey of Literature on Demand for Money: Theoretical and Empirical Work with Special Reference to Error-Correction Models," IMF Working Papers 99/64, International Monetary Fund.
  2. Hendry, David F. & Ericsson, Neil R., 1991. "Modeling the demand for narrow money in the United Kingdom and the United States," European Economic Review, Elsevier, vol. 35(4), pages 833-881, May. [Downloadable!] (restricted)
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  3. Rao, B. Bhaskara, 1993. "Unit root hypothesis, new classical and Keynesian models," Economics Letters, Elsevier, vol. 41(1), pages 47-52. [Downloadable!] (restricted)
  4. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November. [Downloadable!] (restricted)
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  5. Pradhan, Basanta K. & Subramanian, A., 2003. "On the stability of demand for money in a developing economy: Some empirical issues," Journal of Development Economics, Elsevier, vol. 72(1), pages 335-351, October. [Downloadable!] (restricted)
  6. R. W. Hafer & Ali M. Kutan, 2003. "Financial Innovation And The Demand For Money: Evidence From The Philippines," International Economic Journal, Korean International Economic Association, vol. 17(1), pages 17-27, April. [Downloadable!] (restricted)
  7. Smith, Ron P, 1999. "Unit Roots and All That: The Impact of Time-Series Methods on Macroeconomics," Journal of Economic Methodology, Taylor and Francis Journals, vol. 6(2), pages 239-58, July.
  8. Pantula, Sastry G & Gonzalez-Farias, Graciela & Fuller, Wayne A, 1994. "A Comparison of Unit-Root Test Criteria," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(4), pages 449-59, October.
  9. Friedman, Milton & Schwartz, Anna J, 1991. "Alternative Approaches to Analyzing Economic Data," American Economic Review, American Economic Association, vol. 81(1), pages 39-49, March. [Downloadable!] (restricted)
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  10. Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(352), pages 661-92, December. [Downloadable!] (restricted)
  11. Poole, William, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, MIT Press, vol. 84(2), pages 197-216, May. [Downloadable!] (restricted)
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