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Demand for broad money in Singapore: does wealth matter?

Listed author(s):
  • Ahmad Baharumshah

    ()

  • Siew-Voon Soon

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

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File URL: http://hdl.handle.net/10.1007/s12197-013-9267-x
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Article provided by Springer & Academy of Economics and Finance in its journal Journal of Economics and Finance.

Volume (Year): 39 (2015)
Issue (Month): 3 (July)
Pages: 557-573

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Handle: RePEc:spr:jecfin:v:39:y:2015:i:3:p:557-573
DOI: 10.1007/s12197-013-9267-x
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