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The Demand for Money in Bangladesh During 1975-1997: A Cointegration Analysis

Author

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  • Nasiruddin Ahmed

    (Prime Minister's Office, Dhaka)

Abstract

This paper investigates the existence of a long run money demand function for Bangladesh during the period 1975-1997 using the cointegration and error correction modelling approach. It also examines the parameter stability of the money demand function. The empirical results suggest that there exists a unique long-run relationship between real broad money balance, real GDP, and the real exchange rate. The short- term dynamic behaviour of money demand has been investigated by estimating an error correction model in which the error correction term has been found to be correctly signed and statistically significant. Real GDP and the real exchange rate have emerged as important determinants of the demand for money in Bangladesh. Our results provide no evidence of a structural break in the money demand function in the post-liberalisation period in Bangladesh.

Suggested Citation

  • Nasiruddin Ahmed, 1999. "The Demand for Money in Bangladesh During 1975-1997: A Cointegration Analysis," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 34(2), pages 171-185, July.
    • Handle: RePEc:dse:indecr:v:34:y:1999:i:2:p:171-185
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    Cited by:

    1. S. M. Woahid Murad, 2021. "Asymmetric Effects of Economic Uncertainty on Money Demand Function in Bangladesh: A Nonlinear ARDL and Cumulative Fourier Causality Approach," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 20(2), pages 1-13, September.

    More about this item

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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