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How Government Policy and Demographics affect Money Demand Function in Bangladesh

Author

Listed:
  • Umbreen IFTEKHAR

    (Department of Economics, School of Business and Economics, University of Management and Technology Lahore, Pakistan.)

  • Dawood MAMOON

    (Department of Economics, School of Business and Economics, University of Management and Technology Lahore, Pakistan.)

  • Muhammad S. HASSAN

    (Department of Economics, School of Business and Economics, University of Management and Technology Lahore, Pakistan.)

Abstract

Money demand has a key position in macroeconomics generally and monetary economics particularly. The improved economic condition of any country is a sign of increasing money demand and deteriorating economic climate is a sign of decreasing money demand (Maravic & Palic, 2005). In this study, Autoregressive distributed lag (ARDL) approach of co-integration developed by Pesaran et al., (2001) is used to estimate the money demand function. Real interest rate, GDP per capita, exchange rate, fiscal deficit, urban and rural population are selected to determine money demand function in Bangladesh over the period from 1975-2013. The co-integration analysis reveals that interest rate and per capita GDP exerts significant effect upon money demand both in long run and short run as well. Both urban and rural population have significant effect on money demand in the long run and short run and money demand function is found stable over time.

Suggested Citation

  • Umbreen IFTEKHAR & Dawood MAMOON & Muhammad S. HASSAN, 2017. "How Government Policy and Demographics affect Money Demand Function in Bangladesh," Turkish Economic Review, KSP Journals, vol. 4(1), pages 66-74, March.
    • Handle: RePEc:ksp:journ2:v:4:y:2017:i:1:p:66-74
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    References listed on IDEAS

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    1. Baharumshah, Ahmad Zubaidi & Mohd, Siti Hamizah & Mansur M. Masih, A., 2009. "The stability of money demand in China: Evidence from the ARDL model," Economic Systems, Elsevier, vol. 33(3), pages 231-244, September.
    2. Ahmed, Mansur, 2007. "Cointegration, Error Correction and the Demand for Money in Bangladesh," MPRA Paper 21026, University Library of Munich, Germany, revised 10 Jul 2009.
    3. Mohsen Bahmani-oskooee & Charikleia Economidou, 2005. "How stable is the demand for money in Greece?," International Economic Journal, Taylor & Francis Journals, vol. 19(3), pages 461-472.
    4. World Bank, 2012. "World Development Indicators 2012," World Bank Publications - Books, The World Bank Group, number 6014, December.
    5. Paresh Narayan & Seema Narayan & Vinod Mishra, 2009. "Estimating money demand functions for South Asian countries," Empirical Economics, Springer, vol. 36(3), pages 685-696, June.
    6. World Bank, 2013. "World Development Indicators 2013," World Bank Publications - Books, The World Bank Group, number 13191, December.
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    Cited by:

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    2. Chen, Shengming & Hassan, Muhammad Shahid & Latif, Ayesha & Rafay, Abdul & Mahmood, Haider & Xu, Xiaowei, 2023. "Investigating resource curse/blessing hypothesis: An empirical insights from Luxembourg, the Netherlands, and Portugal economies," Resources Policy, Elsevier, vol. 83(C).

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    More about this item

    Keywords

    Bangladesh; Money demand; Per Capita GDP; Real interest rate; Exchange rate; Fiscal deficit; Urban and Rural Population.;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • N30 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - General, International, or Comparative

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