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An empirical investigation of stability of money demand for GCC countries

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  • Haider Mahmood
  • Mohammad Asif

Abstract

Money demand stability attracts the attention of policy makers while deciding the right policy instrument for the monetary policy. The present study estimates the money demand function by using a time spam of 1980-2014 for the GCC countries. For this purpose, it uses the ARDL cointegration technique to find long-run relationships. The cointegration test has confirmed the long-run relationships in money demand functions for all GCC countries. In the long-run analysis, a positive income elasticity of money demand has been found in all GCC countries. Negative and significant semi-interest rate elasticity has been found in UAE, Bahrain, Qatar and Kuwait. Positive and significant exchange rate elasticity has been found in UAE and KSA and it has found negative in Qatar and Kuwait. Positive and significant inflation rate elasticity has been found in Kuwait and Bahrain and it has found negative in UAE, Oman and KSA. Short-run analysis also reveals some significant elasticities. Further, money demand function proofs stable in KSA and Oman and it remains unstable for the rest of GCC countries.

Suggested Citation

  • Haider Mahmood & Mohammad Asif, 2016. "An empirical investigation of stability of money demand for GCC countries," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 11(3), pages 274-286.
    • Handle: RePEc:ids:ijecbr:v:11:y:2016:i:3:p:274-286
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    Cited by:

    1. Mahmood, Haider, 2016. "Determinants of Bilateral FDI Inflows in Pakistan from Major Investing Countries: A Dynamic Panel Approach," MPRA Paper 109456, University Library of Munich, Germany.
    2. Alkhateeb, Tarek Tawfik Yousef & Mahmood, Haider & Sultan, Zafar Ahmad & Ahmad, Nawaz, 2017. "Financial Market Development and Employment Nexus in Saudi Arabia," MPRA Paper 109450, University Library of Munich, Germany.
    3. Mahmood, Haider & Chaudhary, A. R., 2013. "Impact of FDI on Income Inequality in Pakistan," MPRA Paper 109460, University Library of Munich, Germany.
    4. Mahmood, Haider, 2016. "Revisiting Money Demand Function for GCC Countries and Testing its Stability," MPRA Paper 109457, University Library of Munich, Germany.
    5. Alkhateeb, Tarek Tawfik Yousef & Mahmood, Haider & Sultan, Zafar Ahmad & Ahmad, Nawaz, 2017. "Trade Openness and Employment Nexus in Saudi Arabia," MPRA Paper 109451, University Library of Munich, Germany.
    6. Mahmood, Haider, 2016. "Testing Fiscal Sustainability under the Inter-Temporal Budget Constraint in Saudi Arabia," MPRA Paper 109458, University Library of Munich, Germany.
    7. Mahmood, Haider & Alkhateeb, Tarek Tawfik Yousef & Ahmad, Nawaz, 2017. "Impact of Devaluation on Foreign Trade in Saudi Arabia," MPRA Paper 109452, University Library of Munich, Germany.
    8. Al-Qahtani, Maleeha Mohammed Zaaf & Alkhateeb, Tarek Tawfik Yousef & Mahmood, Haider & Abdalla, Manal Abdalla Zahed & Mawad, Ghada Shihata Ebrahim & Alkhatib, Maha Ahmed Hussein, 2020. "Exploring the Level of Managerial, Political, Academic, Economic and Social Women Empowerment in Saudi Arabia," MPRA Paper 109447, University Library of Munich, Germany.
    9. Alkhateeb, Tarek Tawfik Yousef & Mahmood, Haider & Sultan, Zafar Ahmad, 2016. "The Relationship between Exports and Economic Growth in Saudi Arabia," MPRA Paper 109459, University Library of Munich, Germany.
    10. Mahmood, Haider, 2018. "An Investigation of Macroeconomic Determinants of FDI Inflows in Bangladesh," MPRA Paper 109448, University Library of Munich, Germany.
    11. Alkhateeb, Tarek Tawfik Yousef & Alkahtani, Nasser Saad & Mahmood, Haider, 2017. "Assessing the Role of Foreign Labour on Saudi Labour Unemployment in Saudi Arabia," MPRA Paper 109449, University Library of Munich, Germany.
    12. Mahmood, Haider & Alkhateeb, Tarek Tawfik, 2017. "An Estimation of Service Quality in King Khalid Hospital, Saudi Arabia," MPRA Paper 109453, University Library of Munich, Germany.
    13. Haider Mahmood & Tarek Tawfik Yousef Alkhateeb, 2018. "Asymmetrical effects of real exchange rate on the money demand in Saudi Arabia: A non-linear ARDL approach," PLOS ONE, Public Library of Science, vol. 13(11), pages 1-12, November.
    14. Fakhri J. Hasanov & Moayad H. Al Rasasi & Salah S. Alsayaary & Ziyadh Alfawzan, 2022. "Money demand under a fixed exchange rate regime: the case of Saudi Arabia," Journal of Applied Economics, Taylor & Francis Journals, vol. 25(1), pages 385-411, December.
    15. Mahmood, Haider & Alkhateeb, Tarek Tawfik Yousef & Ahmed, Nawaz, 2017. "Impact of devaluation on Saudi oil exports: The J-Curve analysis," MPRA Paper 109454, University Library of Munich, Germany.
    16. Mahmood, Haider & Alkhateeb, Tarek Tawfik Yousef & Ahmed, Nawaz, 2017. "Impact of Devaluation on Industrial Exports in Saudi Arabia: J-Curve Hypothesis," MPRA Paper 109455, University Library of Munich, Germany.

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