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Demand for Money in Hungary: An ARDL Approach

  • Nikolaos Dritsakis

    ()

    (University of Macedonia Economics and Social Sciences, GREECE)

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    This study examines the demand for money in Hungary using the autoregressive distributed lag (ARDL) cointegration framework. The results based on the bounds testing procedure confirm that a stable, long-run relationship exists between demand for money and its determinants: real income, inflation rate and nominal exchange rate. The empirical results show that there is a unique cointegrated and stable long-run relationship among M1 real monetary aggregate, real income, inflation rate and nominal exchange rate. We find that the real income elasticity coefficient is positive while the inflation rate elasticity and nominal exchange rate are negative. This indicates that depreciation of domestic currency decreases the demand for money. Our results also reveal that after incorporating the CUSUM and CUSUMSQ tests, M1 money demand function is stable between 1995:1 and 2010:1.

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    File URL: http://www.bapress.ca/Journal-5/Demand%20for%20Money%20in%20Hungary-%20An%20ARDL%20Approach%20By%20Nikolaos%20Dritsakis.pdf
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    Article provided by Better Advances Press, Canada in its journal Review of Economics & Finance.

    Volume (Year): 1 (2011)
    Issue (Month): (November)
    Pages: 01-16

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    Handle: RePEc:bap:journl:110501
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    16. Ahmad Abd Halim & Mohd Daud Siti Nurazira & Marzuki Ainulashikin, 2008. "Sovereign Credit Ratings and Macroeconomic Variables: An Empirical Analysis on Dynamic Linkages in Malaysia Using Bound Test Approach," The IUP Journal of Applied Economics, IUP Publications, vol. 0(6), pages 29-39, November.
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