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Demand for broad money in Singapore: does wealth matter?

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  • Ahmad Baharumshah

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  • Siew-Voon Soon

Abstract

We present a stable long-run relationship between real money balances and its determinants, including asset prices, to capture wealth effects. The major findings are, first, asset (housing) prices have a noticeable, positive, and a significant effect on the demand for broad money in Singapore. Developments in the housing market alter the structure of money demand and, so, may complicate the conduct of monetary policies. Second, no evidence of a monetary overhang is found, and the augmented wealth model passes a battery of diagnostic tests. Third, the results confirm that the estimated model is invariant to policy changes and, consequently, immune to the so-called Lucas critiques. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Ahmad Baharumshah & Siew-Voon Soon, 2015. "Demand for broad money in Singapore: does wealth matter?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(3), pages 557-573, July.
  • Handle: RePEc:spr:jecfin:v:39:y:2015:i:3:p:557-573
    DOI: 10.1007/s12197-013-9267-x
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    1. repec:spr:jecfin:v:41:y:2017:i:2:d:10.1007_s12197-016-9358-6 is not listed on IDEAS

    More about this item

    Keywords

    Global financial crisis; House price; Monetary overhang; Money demand; C22; E41; E52;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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