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Relationship of Fiscal Discipline and Household Income on Money Demand Function in Sri Lanka

Author

Listed:
  • Dawood MAMOON

    (University of Management and Technology (UMT), School of Business & Economics, Lahore, Pakistan.)

  • Umbreen IFTIKHAR

    (University of Management and Technology (UMT), School of Business & Economics, Lahore, Pakistan.)

  • Muhammad Shahid HASSAN

    (Department of Economics, School of Business and Economics, University of Management and Technology Lahore, Pakistan.)

Abstract

This paper attempts to find those determinants stirring the function of money demand in Sri Lanka during 1975-2013. The empirical analysis starts from applying the unit root tests i.e. Ng-Perron. We apply ARDL bound testing approach of co-integration to scrutinize the co-integration in variables. We select independent variables like per capita GDP, interest rate, exchange rate, fiscal deficit, urban population and rural population to determine money demand function. The findings revealed that income, interest rate and fiscal deficit effect money demand significantly and positively. The exchange rate affects negatively and significantly upon money demand. The stable money demand function is found over time applying CUSUM and CUSUMSQ stability test. The model of our study strongly recommends the real demand for M2 is vital monetary aggregate in terms of policy implication including the appropriateness of model in Sri Lanka.

Suggested Citation

  • Dawood MAMOON & Umbreen IFTIKHAR & Muhammad Shahid HASSAN, 2017. "Relationship of Fiscal Discipline and Household Income on Money Demand Function in Sri Lanka," Journal of Economics Bibliography, EconSciences Journals, vol. 4(1), pages 1-9, March.
    • Handle: RePEc:cvv:journ6:v:4:y:2017:i:1:p:1-9
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    Cited by:

    1. Muhammad Shahid Hassan & Amna Kausar & Noman Arshed, 2022. "Investigating Export Determinants: A Time Series Evidence From Canada," SAGE Open, , vol. 12(2), pages 21582440221, June.
    2. Saghir Pervaiz GHAURI & Hina QADIR & Rizwan Raheem AHMED & Dalia STREIMIKIENE & Justas STREIMIKIS, 2022. "The Exports Performance of Pakistan: Evidence from the ARDL Cointegration Analysis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 150-168, December.
    3. Chen, Shengming & Hassan, Muhammad Shahid & Latif, Ayesha & Rafay, Abdul & Mahmood, Haider & Xu, Xiaowei, 2023. "Investigating resource curse/blessing hypothesis: An empirical insights from Luxembourg, the Netherlands, and Portugal economies," Resources Policy, Elsevier, vol. 83(C).
    4. Yu-Ke, Chen & Hassan, Muhammad Shahid & Kalim, Rukhsana & Mahmood, Haider & Arshed, Noman & Salman, Muhammad, 2022. "Testing asymmetric influence of clean and unclean energy for targeting environmental quality in environmentally poor economies," Renewable Energy, Elsevier, vol. 197(C), pages 765-775.
    5. Gao, Jinchao & Hassan, Muhammad Shahid & Kalim, Rukhsana & Sharif, Arshian & Alkhateeb, Tarek Tawfik Yousef & Mahmood, Haider, 2023. "The role of clean and unclean energy resources in inspecting N-shaped impact of industrial production on environmental quality: A case of high polluting economies," Resources Policy, Elsevier, vol. 80(C).

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    Keywords

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    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other

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