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Demand for Money in the Transition Economy : The Case of the Czech Republic 1993–2001

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  • Komárek Luboš
  • Melecký Martin

Abstract

In this paper we strive to present a somewhat internationalised view of demand for money as applied to the Czech Republic. We extend the traditional money demand function, consisting purely of domestic variables, to include certain foreign determinants that probably affect the demand for money in a small open transition economy. We do so in the case of both narrow and broad money. For the purposes of generalisation and robust estimates we employ several estimation techniques, namely the Johansen procedure, ARDL, DOLS and ADL. We also consider the aspect of the stability of such estimates. Finally, we analyse the possible effects on prices and output of disequilibria on money market. We have found that a liquidity gap probably has a significant influence on both prices and output.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp614.pdf
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Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 614.

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Length: 34 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:wrk:warwec:614

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Keywords: Demand for money ; transmission mechanism ; transition ; Czech Republic ; cointegration;

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References

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  17. James H. Stock & Mark W. Watson, 1991. "A simple estimator of cointegrating vectors in higher order integrated systems," Working Paper Series, Macroeconomic Issues 91-3, Federal Reserve Bank of Chicago.
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  20. Edgar L. Feige & Michael Faulend & Velimir Sonje & Vedran Sosic, 2001. "Currency Substitution, Unoffical Dollarization and Estimates of Foreign Currency Held Abroad: The Case of Croatia," International Finance 0106001, EconWPA.
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