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Error-correction based panel estimates of the demand for money of selected Asian countries with the extreme bounds analysis

  • Kumar, Saten
  • Rao, B. Bhaskara

This paper uses the extreme bounds analysis (EBA) of Leamer (1983, 1985) to analyze the robust determinants of the demand for money in a panel of 17 Asian countries for the period 1970 to 2009. These robust determinants are found to be unit root variables. Therefore, cointegration between these variables is tested with a recent time series panel method developed by Westerlund (2007). This method uses the error-correction formulation and has more power against the null of no cointegration. The results show that there is a well-defined long-run demand for money. Using the lagged error correction term from the estimated cointegrating equation, the short-run dynamic relationships are estimated. This paper, thus, suggests some useful guidelines to estimate other relationships with panel data.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 4 ()
Pages: 1181-1188

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Handle: RePEc:eee:ecmode:v:29:y:2012:i:4:p:1181-1188
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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