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Money Demand Function for Bangladesh

Author

Listed:
  • Islam, Anisul M.

    (Professor of Economics in the college of Business, University of Houston-Downtown, Houston, Texas, USA.)

Abstract

This paper provides new evidence on the money demand function for Bangladesh using cointegration techniques and a longer quarterly time series data than previously used. Cointegration results indicate that a single co-integrating vector describes the long-run equilibrium money demand relationship in Bangladesh for both the narrow and broad money categories. It is also found that the money demand function is stable and is highly dominated by the transaction motive for holding money. The effects of alternative opportunity cost variables on money demand were not found to be significant. The short-run money demand function was found to be stable and the speed of adjustment to the long-run equilibrium was found to be reasonable for both money categories. The empirical results may have significant implications for monetary policy of the country.

Suggested Citation

  • Islam, Anisul M., 2000. "Money Demand Function for Bangladesh," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 26(4), pages 89-114, December.
    • Handle: RePEc:ris:badest:0405
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    Citations

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    Cited by:

    1. Hossain, Akhand Akhtar, 2010. "Monetary targeting for price stability in Bangladesh: How stable is its money demand function and the linkage between money supply growth and inflation?," Journal of Asian Economics, Elsevier, vol. 21(6), pages 564-578, December.
    2. S. M. Woahid Murad, 2021. "Asymmetric Effects of Economic Uncertainty on Money Demand Function in Bangladesh: A Nonlinear ARDL and Cumulative Fourier Causality Approach," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 20(2), pages 1-13, September.
    3. S. M. Woahid Murad, 2021. "Asymmetric Effects of Economic Uncertainty on Money Demand Function in Bangladesh: A Nonlinear ARDL and Cumulative Fourier Causality Approach," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 20(2), pages 187-199, September.
    4. S. M. Woahid Murad, 2021. "Asymmetric Effects of Economic Uncertainty on Money Demand Function in Bangladesh: A Nonlinear ARDL and Cumulative Fourier Causality Approach," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 20(3), pages 201-213, December.

    More about this item

    Keywords

    Money demand; Opportunity costs; Nominal interest rates; Critical values; Development studies; Anticipated inflation; Inflation rates; Coefficients; Time series; Proxy reporting;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines

    Statistics

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