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Estimation of the Money Demand Function in Russia

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  • Kirill Sosunov

    (National Research University Higher School of Economics. Department of Theoretical Economics)

Abstract

In this paper following Ball (2012) I estimate the demand function for narrow money aggregate M1 in Russia for 2003-2012. I show that after inclusion of cash foreign exchange and relevant interest rate the money demand is stable in the long- and the short-run and estimated long-run elasticities and short-run dynamics of the money demand yields sensible values for the simple functional form. I also show that most of the short-run volatility of the money holding can be attributed to the slow speed of adjustment of the demand not to the unexplained shocks.

Suggested Citation

  • Kirill Sosunov, 2012. "Estimation of the Money Demand Function in Russia," HSE Working papers WP BRP 20/EC/2012, National Research University Higher School of Economics.
    • Handle: RePEc:hig:wpaper:20/ec/2012
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    References listed on IDEAS

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    1. Iikka Korhonen & Aaron Mehrotra, 2010. "Money Demand in Post-Crisis Russia: Dedollarization and Remonetization," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 46(2), pages 5-19, March.
    2. William Poole, 1969. "Optimal choice of monetary policy instruments in a simple stochastic macro model," Special Studies Papers 2, Board of Governors of the Federal Reserve System (U.S.).
    3. Ball, Laurence, 2001. "Another look at long-run money demand," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 31-44, February.
    4. Goldfeld, Stephen M. & Sichel, Daniel E., 1990. "The demand for money," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 1, chapter 8, pages 299-356, Elsevier.
    5. Friedman, Benjamin M, 1988. "Lessons on Monetary Policy from the 1980s," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 51-72, Summer.
    6. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
    7. Feige, Edgar L., 1990. "Defining and estimating underground and informal economies: The new institutional economics approach," World Development, Elsevier, vol. 18(7), pages 989-1002, July.
    8. Ball, Laurence, 2012. "Short-run money demand," Journal of Monetary Economics, Elsevier, vol. 59(7), pages 622-633.
    9. Mohsen Bahmani-Oskooee & Michael P. Barry, 2000. "Stability of the Demand for Money in an Unstable Country: Russia," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 22(4), pages 619-629, July.
    10. Oomes, Nienke & Ohnsorge, Franziska, 2005. "Money demand and inflation in dollarized economies: The case of Russia," Journal of Comparative Economics, Elsevier, vol. 33(3), pages 462-483, September.
    11. Duca, John V, 2000. "Financial Technology Shocks and the Case of the Missing M2," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 820-839, November.
    12. William Poole, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, Oxford University Press, vol. 84(2), pages 197-216.
    13. Benjamin M. Friedman, 1988. "Lessons On Monetary Policy From The 1980's," NBER Working Papers 2551, National Bureau of Economic Research, Inc.
    14. Stephen M. Goldfeld, 1973. "The Demand for Money Revisited," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(3), pages 577-646.
    15. Fridman Alla & Verbetsky Aleksey, 2001. "Currency Substitution in Russia," EERC Working Paper Series 01-05e, EERC Research Network, Russia and CIS.
    16. Judd, John P & Scadding, John L, 1982. "The Search for a Stable Money Demand Function: A Survey of the Post-1973 Literature," Journal of Economic Literature, American Economic Association, vol. 20(3), pages 993-1023, September.
    17. John P. Judd & John L. Scadding, 1982. "The search for a stable money demand function: a survey of the post- 1973 literature," Working Papers in Applied Economic Theory 109, Federal Reserve Bank of San Francisco.
    18. repec:zbw:bofitp:2010_013 is not listed on IDEAS
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    Cited by:

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    2. Muhammad Ahad, 2017. "Financial Development and Money Demand Function: Cointegration, Causality and Variance Decomposition Analysis for Pakistan," Global Business Review, International Management Institute, vol. 18(4), pages 811-824, August.
    3. Andrei Polbin & Sergey Drobyshevsky, 2014. "Developing a Dynamic Stochastic Model of General Equilibrium for the Russian Economy," Research Paper Series, Gaidar Institute for Economic Policy, issue 166P, pages 156-156.

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    More about this item

    Keywords

    macroeconomics; money demand; Russia;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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