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Money Demand and Economic Liberalization in a Small Open Economy—Trinidad and Tobago

  • Stephen Dobson

    ()

  • Carlyn Ramlogan

Economic liberalization creates potential instability in money demand. The introduction of liberalization in the early 1990s coincided with instability in the long-run demand for broad money (M2). OLS estimates confirm the presence of a structural break in the M2 model. Monetary policy should be based on a narrow definition of money. Moreover, the demand for money function must take explicit account of the openness of the economy. The results have important implications for policymakers in other Caribbean countries that are contemplating economic liberalization. Copyright Kluwer Academic Publishers 2001

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File URL: http://hdl.handle.net/10.1023/A:1011137624007
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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 12 (2001)
Issue (Month): 3 (July)
Pages: 325-339

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Handle: RePEc:kap:openec:v:12:y:2001:i:3:p:325-339
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  1. Augustine C. Arize & John B. Spalding & Bedford N. Umezulike, 1991. "Impact of Foreign Monetary Developments on Demand for Money: Regression Estimates and Forecast Results," Journal of Economic Studies, Emerald Group Publishing, vol. 18(2), pages 39-48, May.
  2. Mankiw, N Gregory & Summers, Lawrence H, 1986. "Money Demand and the Effects of Fiscal Policies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(4), pages 415-29, November.
  3. Sunil Sharma & Neil R. Ericsson, 1996. "Broad Money Demand and Financial Liberalization in Greece," IMF Working Papers 96/62, International Monetary Fund.
  4. Abdur Chowdhury, 1997. "The financial structure and the demand for money in Thailand," Applied Economics, Taylor & Francis Journals, vol. 29(3), pages 401-409.
  5. Eu Chye Tan, 1997. "Money demand amid financial sector developments in Malaysia," Applied Economics, Taylor & Francis Journals, vol. 29(9), pages 1201-1215.
  6. Volker Treichel, 1997. "Broad Money Demand and Monetary Policy in Tunisia," IMF Working Papers 97/22, International Monetary Fund.
  7. Philipp C. Rother, 1998. "Money Demand and Regional Monetary Policy in the West African Economic and Monetary Union," IMF Working Papers 98/57, International Monetary Fund.
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