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Demand for Money in the Asian Countries: A Systems GMM Panel Data Approach and Structural Breaks

  • Rao, B. Bhaskara
  • Tamazian, Artur
  • Singh, Prakash

A systems GMM method is used to estimate the demand for money (M1) for a panel of 11 Asian countries from 1970 to 2007. This method has advantages of which the most important one is its ability to minimise small sample bias with persistence in the variables. This system GMM method of Blundell and Bond (1998) simultaneously estimates specifications with the levels and first differences specifications of the variables. We test for structural stability of the estimated function with a recently developed test, for this approach, by Mancini-Griffoli and Pauwels (2006). Our results show that there is a well defined demand for money for these countries and there are no structural breaks.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15030.

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Date of creation: 05 May 2009
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Handle: RePEc:pra:mprapa:15030
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  1. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  2. Mohsen Bahmani-Oskooee & Hafez Rehman, 2005. "Stability of the money demand function in Asian developing countries," Applied Economics, Taylor & Francis Journals, vol. 37(7), pages 773-792.
  3. Rao, B. Bhaskara & Kumar, Saten, 2009. "A panel data approach to the demand for money and the effects of financial reforms in the Asian countries," Economic Modelling, Elsevier, vol. 26(5), pages 1012-1017, September.
  4. B Bhaskara Rao, 2007. "The nature of the ADAS model based on the ISLM model," Cambridge Journal of Economics, Oxford University Press, vol. 31(3), pages 413-422, May.
  5. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  6. Chien-Chiang Lee & Mei-Se Chien, 2008. "Stability of money demand function revisited in China," Applied Economics, Taylor & Francis Journals, vol. 40(24), pages 3185-3197.
  7. Tommaso Mancini-Griffoli & Laurent L. Pauwels, 2006. "Is There a Euro Effect on Trade? An Application of End-of-Sample Structural Break Tests for Panel Data," IHEID Working Papers 04-2006, Economics Section, The Graduate Institute of International Studies, revised Apr 2006.
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