Interest-free and Interest-bearing Money Demand: Policy Invariance and Stability
This paper, using quarterly Iranian data for the period of 1966-1998, extends the literature by investigating the stability of the interest-free money demand function. The study also examines the stability of economic agents' behavior in demanding interest-bearing and interest-free money. It was found, contrary to interest-bearing demand or money, both short- and long-run demand for interest-free money functions are stable and their coefficients are invariant with respect to policy and other exogenous shocks as well as changes in regime.
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