Demand for Money in Nepal: An ARDL Bounds Testing Approach
This paper investigates the demand for money in Nepal using the Autoregressive Distributed Lag (ARDL) approach for the period of 1975-2011.The results based on the bounds testing procedure reveal that there exist the cointegration among the real money aggregates (and), real income, inflation and interest rate. The real income elasticity coefficient is found to be positive and the inflation coefficient is negative. The interest rate coefficient is negative for both of the real monetary aggregates supporting the theoretical explanation. In addition, the error correction models suggest that the deviations from the long-run equilibrium are short-lived in than . Finally, the CUSUM and CUSUMSQ tests reveal that the money demand function is stable, but money demand function is not stable implying that the monetary policy should pay more attention to than . s. Nepal exports more to SAFTA countries than non-SAFTA and imports less from the OECD countries than non-OECD. As per basic idea of gravity model, distance to trade partner countries is highly significant implying higher the distance, lower the trade. The country specific fixed effect analysis shows that time invariant factors are also significant to determine the trade balance of Nepal.
Volume (Year): 25 (2013)
Issue (Month): 1 (April)
|Contact details of provider:|| Web page: http://www.nrb.org.np/ecorev/|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Subramanian S. Sriram, 2001. "A Survey of Recent Empirical Money Demand Studies," IMF Staff Papers, Palgrave Macmillan, vol. 47(3), pages 3.
- Dekle, Robert & Pradhan, Mahmood, 1999. "Financial Liberalization and Money Demand in the ASEAN Countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 4(3), pages 205-15, July.
- Khan, Muhammad Arshad & Sajjid, Muhammad Zabir, 2005.
"The Exchange Rates and Monetary Dynamics in Pakistan: An Autoregressive Distributed Lag (ARDL) Apporach,"
6752, University Library of Munich, Germany.
- Muhammad Arshad Khan & Muhammad Zabir Sajjid, 2005. "The Exchange Rates and Monetary Dynamics in Pakistan: An Autoregressive Distributed Lag (ARDL) Approach," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 10(2), pages 87-99, Jul-Dec.
- Birendra Bahadur Budha, 2011. "An Empirical Analysis of Money Demand Function in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 23(1), pages 54-70, April.
- Duca, John V. & VanHoose, David D., 2004. "Recent developments in understanding the demand for money," Journal of Economics and Business, Elsevier, vol. 56(4), pages 247-272.
- Sophocles N. Brissimis & George Hondroyiannis & P.A.V.B. Swamy & George S. Tavlas, 2003.
"Empirical Modelling of Money Demand in Periods of Structural Change: The Case of Greece,"
01, Bank of Greece.
- Sophocles N. Brissimis & George Hondroyiannis & P. A. V. B. Swamy & George S. Tavlas, 2003. "Empirical Modelling of Money Demand in Periods of Structural Change: The Case of Greece," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 605-628, December.
- Carl E. Walsh, 2003. "Monetary Theory and Policy, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232316, June.
- Shrestha, M.B. & Chowdhury, k., 2006. "Financial Liberalization Index for Nepal," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 3(1), pages 41-54.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- repec:nrb:journl:v:23:y:2011:i:1:p:4 is not listed on IDEAS
- P K Narayan & S Narayan, 2008. "Estimating the Demand for Money in an Unstable Open Economy: The Case of the Fiji Islands," Economic Issues Journal Articles, Economic Issues, vol. 13(1), pages 71-91, March.
When requesting a correction, please mention this item's handle: RePEc:nrb:journl:v:25:y:2013:i:1:p:21-36. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dr. Bishnu Prasad Gautam)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.