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Exchange rate volatility and demand for money in Iran

Author

Listed:
  • Sahar Bahmani
  • Mohsen Bahmani-Oskooee

Abstract

In 1963, Nobel Laureate, Robert Mundell (1963) argued that the demand for money could depend on the exchange rate, in addition to income and interest rate. In this paper, we argue that, in addition to the exchange rate itself, its volatility could also serve as another determinant of the demand for money. We demonstrate our conjecture by using data from post-revolutionary Iran and the bounds testing approach. Our results reveal that indeed, exchange rate volatility has short-run as well as long-run effects on the demand for real M2 monetary aggregate in Iran.

Suggested Citation

  • Sahar Bahmani & Mohsen Bahmani-Oskooee, 2012. "Exchange rate volatility and demand for money in Iran," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 5(3), pages 268-276.
    • Handle: RePEc:ids:ijmefi:v:5:y:2012:i:3:p:268-276
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    Citations

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    Cited by:

    1. Vittorio Daniele & Pasquale Foresti & Oreste Napolitano, 2017. "The stability of money demand in the long-run: Italy 1861–2011," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 11(2), pages 217-244, May.
    2. Mohammed Djebbouri & Abdelkarim Mansouri & Abderrahmane Tahi, 2019. "Determinants of Money Demand in Algeria: An Empirical Study Using Cointegration and Error Correction Model," Modern Applied Science, Canadian Center of Science and Education, vol. 13(10), pages 1-78, October.
    3. Shehu El-Rasheed & Hussin Abdullah & Jauhari Dahalan, 2017. "Monetary Uncertainty and Demand for Money Stability in Nigeria: An Autoregressive Distributed Lag Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 601-607.

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