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

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  • Kumar, Saten
  • Rao, B. Bhaskara

Abstract

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.

Suggested Citation

  • Kumar, Saten & Rao, B. Bhaskara, 2012. "Error-correction based panel estimates of the demand for money of selected Asian countries with the extreme bounds analysis," Economic Modelling, Elsevier, vol. 29(4), pages 1181-1188.
  • Handle: RePEc:eee:ecmode:v:29:y:2012:i:4:p:1181-1188
    DOI: 10.1016/j.econmod.2012.04.008
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    Cited by:

    1. Afees Salisu & Idris Ademuyiwa & Basiru Fatai, 2013. "Modelling the Demand for Money in Sub-Saharan Africa (SSA)," Economics Bulletin, AccessEcon, vol. 33(1), pages 635-647.
    2. César Carrera & Jairo Flores, 2017. "Modelling and forecasting money demand: divide and conquer," Working Papers 2017-91, Peruvian Economic Association.
    3. Ahmad Baharumshah & Siew-Voon Soon, 2015. "Demand for broad money in Singapore: does wealth matter?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(3), pages 557-573, July.
    4. repec:sgm:jbfeuw:v:2:y:2017:i:8:p:27-53 is not listed on IDEAS
    5. Gerlach-Kristen, Petra & O'Connell, Brian & O'Toole, Conor, 2013. "How do banking crises affect aggregate consumption? Evidence from international crisis episodes," Papers WP464, Economic and Social Research Institute (ESRI).

    More about this item

    Keywords

    Demand for money; Extreme bounds analysis; Panel ECM; Structural breaks;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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