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The Gambia; Demand for Broad Money and Implications for Monetary Policy Conduct

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  • Subramanian S Sriram

Abstract

This paper evaluates the demand for broad money (M2) in The Gambia for January 1988-June 2007. There appears to be a long-run relationship for demand for real M2, but the relationship is not stable. Exogenous output shocks, financial innovation, changes in income velocity, and inadequate data quality contribute to the instability. The authorities may need to apply the monetary targeting regime flexibly in the overall objective of preserving price stability. A possible option for The Gambia is to become an inflation targeter lite.

Suggested Citation

  • Subramanian S Sriram, 2009. "The Gambia; Demand for Broad Money and Implications for Monetary Policy Conduct," IMF Working Papers 09/192, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:09/192
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    References listed on IDEAS

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    1. Klein, Benjamin, 1977. "The Demand for Quality-adjusted Cash Balances: Price Uncertainty in the U.S. Demand for Money Function," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 691-715, August.
    2. Honohan, Patrick, 1994. "Inflation and the demand for money in developing countries," World Development, Elsevier, vol. 22(2), pages 215-223, February.
    3. Markus Knell & Helmut Stix, 2004. "Three Decades of Money Demand Studies. Some Differences and Remarkable Similarities," Working Papers 88, Oesterreichische Nationalbank (Austrian Central Bank).
    4. Neil R. Ericsson, 1998. "Empirical modeling of money demand," Empirical Economics, Springer, vol. 23(3), pages 295-315.
    5. Rudebusch, Glenn D. & Svensson, Lars E. O., 2002. "Eurosystem monetary targeting: Lessons from U.S. data," European Economic Review, Elsevier, vol. 46(3), pages 417-442, March.
    6. Eu Chye Tan, 1997. "Money demand amid financial sector developments in Malaysia," Applied Economics, Taylor & Francis Journals, vol. 29(9), pages 1201-1215.
    7. Carare, Alina & Stone, Mark R., 2006. "Inflation targeting regimes," European Economic Review, Elsevier, vol. 50(5), pages 1297-1315, July.
    8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    9. Mark R. Stone, 2003. "Inflation Targeting Lite," IMF Working Papers 03/12, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Economic models; Financial sector; Broad money; Demand for money; Economic growth; Commercial banks; Central bank policy; Monetary policy; Money demand; Interest rates on deposits; Liquidity; Gambia; The; Price stabilization; Time series; The Gambia; Sub-Saharan Africa; cointegration; error-correction; inflation targeter lite; inflation targeting; M2; inflation; rediscount rate; monetary fund; Financial Markets and the Macroeconomy; Gambia; Inflation Tergeting; Financial Institutions And Services;

    JEL classification:

    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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