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Long- and short-run determinants of the demand for money in New Zealand: A cointegration analysis

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  • Abbas Valadkhani

Abstract

The existence of a stable demand for money is very important for the conduct of monetary policy even in this new era of inflation targeting. This paper examines the long-run determinants of the demand for M3 in New Zealand employing the Johansen cointegration technique and quarterly data for the period 1988: 1-2002: 2- The paper finds, inter alia, that the demand for money is cointegrated with real income, the spread between interest on money and on non-money assets, the expected rate of inflation, and the real effective, (trade weighted index) exchange rate.

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  • Abbas Valadkhani, 2002. "Long- and short-run determinants of the demand for money in New Zealand: A cointegration analysis," New Zealand Economic Papers, Taylor & Francis Journals, vol. 36(2), pages 235-250.
    • Handle: RePEc:taf:nzecpp:v:36:y:2002:i:2:p:235-250
    DOI: 10.1080/00779950209544373
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