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Real Money Demand, Income, and Interest Rates in Senegal: Is there a Long-Run Stable Relation?

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  • Marcelin Diagne

Abstract

In this paper, I examine the stability of the long-run relationship between real money demand, income, and interest rates in Senegal. Using advances in unit root and co-integration, I test for co-integration between M1 velocity, output, and the interest rate. By virtue of the fixed exchange rate regime, I used both the three months French Treasury bill and the deposit rate to proxy the opportunity cost of holding money. I used Stock and Watson ( 1993 ) DOLS in addition to an ECM. Quarterly data ranging from 1970:Q4 to 2006:Q4 is used in the analysis, and the results reveal evidence of co-integration between real money demand, income, and the interest rate. For this study, I used both an ECM co-integration test and Johansen (Journal of Economic Dynamics and Control 12(2/3), 231-254, 1988 ) co-integration method. Copyright International Atlantic Economic Society 2010

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  • Marcelin Diagne, 2010. "Real Money Demand, Income, and Interest Rates in Senegal: Is there a Long-Run Stable Relation?," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 16(2), pages 213-222, May.
    • Handle: RePEc:kap:iaecre:v:16:y:2010:i:2:p:213-222:10.1007/s11294-010-9259-y
    DOI: 10.1007/s11294-010-9259-y
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    1. Jafar HAGHIGHAT, 2011. "How Much Control Dose Central Bank of Iran over Money Supply?," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 1(7), pages 1-29, December.

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    More about this item

    Keywords

    Co-integration; Unit root; Real money balances; Monetary; Senegal; E4; F3; F31; F41; C10;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • F3 - International Economics - - International Finance
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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