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Modeling the Turkish Broad Money Demand

Author

Listed:
  • Defne Mutluer
  • Yasemin Barlas

Abstract

This paper analyzes broad money demand in Turkey between 1987 and 2001, a period characterized by a process of financial sector liberalization, implemented using various structural reforms and deregulations. It presents the historical background and the pace of liberalization, accompanied by a discussion on main economic indicators. It gives a brief summary on theory for the analysis of money demand and constructs an error correction model for M2X using quarterly data, where the long run relationship is established using real income, interest rate on deposits, interest rate on government securities, inflation rate and real exchange rate. The results show that, both exchange rate and inflation rate have substantial impact on the Turkish broad money demand.

Suggested Citation

  • Defne Mutluer & Yasemin Barlas, 2002. "Modeling the Turkish Broad Money Demand," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 2(2), pages 55-75.
  • Handle: RePEc:tcb:cebare:v:2:y:2002:i:2:p:55-75
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    File URL: http://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Central+Bank+Review/2002/Volume+2-2/
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    References listed on IDEAS

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    1. James Boughton, 1992. "International comparisons of money demand," Open Economies Review, Springer, vol. 3(3), pages 323-343, October.
    2. Sunil Sharma & Neil R. Ericsson, 1998. "Broad money demand and financial liberalization in Greece," Empirical Economics, Springer, vol. 23(3), pages 417-436.
    3. 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.
    4. Irfan Civcir, 2003. "Money demand, financial liberalization and currency substitution in Turkey," Journal of Economic Studies, Emerald Group Publishing, vol. 30(5), pages 514-534, October.
    5. Johansen, Soren, 1992. "Testing weak exogeneity and the order of cointegration in UK money demand data," Journal of Policy Modeling, Elsevier, vol. 14(3), pages 313-334, June.
    6. Engle, R. F. & Granger, C. W. J. (ed.), 1991. "Long-Run Economic Relationships: Readings in Cointegration," OUP Catalogue, Oxford University Press, number 9780198283393.
    7. Engle, Robert F. & Yoo, Byung Sam, 1987. "Forecasting and testing in co-integrated systems," Journal of Econometrics, Elsevier, vol. 35(1), pages 143-159, May.
    8. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    9. Jean-Claude Nachega, 2001. "A Cointegration Analysis of Broad Money Demand in Cameroon," IMF Working Papers 01/26, International Monetary Fund.
    10. Hatanaka, Michio, 1996. "Time-Series-Based Econometrics: Unit Roots and Co-integrations," OUP Catalogue, Oxford University Press, number 9780198773535.
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    12. Oguz Atuk & Beyza Pinar Ural, 2002. "Seasonal Adjustment Methods : An Application to the Turkish Monetary Aggregates," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 2(1), pages 21-37.
    13. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
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    Citations

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    Cited by:

    1. Ozge Akinci, 2003. "Modeling the Demand for Currency Issued in Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 3(1), pages 1-25.
    2. PELINESCU, Elena & SIMIONESCU, Mihaela, 2014. "Modelling And Predicting The Real Money Demand In Romania," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 1(1), pages 117-124.
    3. Robert Tchaidze & Salome Tvalodze, 2011. "Deposit Formation in Georgia," IMF Working Papers 11/78, International Monetary Fund.
    4. Cem Saatçioðlu & Levent Korap, 2007. "Turkish Money Demand, Revisited: Some Implications For Inflation And Currency Substitution Under Structural Breaks," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 21(1+2), pages 107-124.
    5. Levent, Korap, 2008. "Modeling Turkish M2 broad money demand: a portfolio-based approach using implications for monetary policy," MPRA Paper 19703, University Library of Munich, Germany.

    More about this item

    Keywords

    Money Demand; Financial Liberalization; Cointegration; Error-correction Modeling;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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