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The Demand for Money in Cote d’Ivoire: Evidence from the Cointegration Test

Author

Listed:
  • Drama, Bedi Guy Herve
  • Yao, Shen

Abstract

This paper demonstrates that there is a long run equilibrium relationship between money supply 〖(M〗_1) and its main determinants, real income (GDP) and interest rate in Cote d’Ivoire. In order to investigate long-term relationship among these variables, we use Juselius and Johansen cointegration test with time series data covering the period of 1980-2007. The results show that there is long-term relationship among these variables as well as the linkage between them. Base from this result we found that only real money balances 〖(M〗_1) has significant long -run economic impact of variations in monetary policy in Cote d’Ivoire. However, the study also revealed that the effect of aggregate 〖(M〗_2) is not so stable linking with it determinants.

Suggested Citation

  • Drama, Bedi Guy Herve & Yao, Shen, 2010. "The Demand for Money in Cote d’Ivoire: Evidence from the Cointegration Test," MPRA Paper 20131, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:20131
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    File URL: https://mpra.ub.uni-muenchen.de/20131/1/MPRA_paper_20131.pdf
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    References listed on IDEAS

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    1. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(03), pages 597-625, June.
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    3. Milton Friedman, 1959. "The Demand for Money: Some Theoretical and Empirical Results," NBER Chapters,in: The Demand for Money: Some Theoretical and Empirical Results, pages 1-29 National Bureau of Economic Research, Inc.
    4. Faig, Miquel, 1988. "Characterization of the optimal tax on money when it functions as a medium of exchange," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 137-148, July.
    5. Robert H. Rasche, 1993. "Monetary aggregates, monetary policy and economic activity," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 1-35.
    6. Rother, Philipp C, 1999. "Money Demand in the West African Economic and Monetary Union--The Problems of Aggregation," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 8(3), pages 422-447, October.
    7. David A. Dickey & Dennis W. Jansen & Daniel L. Thornton, 1991. "A primer on cointegration with an application to money and income," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 58-78.
    8. Baharumshah, Ahmad Zubaidi & Mohd, Siti Hamizah & Yol, Marial Awou, 2009. "Stock prices and demand for money in China: New evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(1), pages 171-187, February.
    9. Chen, Baizhu, 1997. "Long-Run Money Demand and Inflation in China," Journal of Macroeconomics, Elsevier, vol. 19(3), pages 609-617, July.
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    11. Hafer, R W & Jansen, Dennis W, 1991. "The Demand for Money in the United States: Evidence from Cointegration Tests," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(2), pages 155-168, May.
    12. Hoffman, Dennis L. & Rasche, Robert H. & Tieslau, Margie A., 1995. "The stability of long-run money demand in five industrial countries," Journal of Monetary Economics, Elsevier, vol. 35(2), pages 317-339, April.
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    Cited by:

    1. doğru, bülent, 2013. "Dynamic Analysis of Money Demand Function: Case of Turkey," MPRA Paper 48402, University Library of Munich, Germany.
    2. Kumar, Saten & Webber, Don J. & Fargher, Scott, 2013. "Money demand stability: A case study of Nigeria," Journal of Policy Modeling, Elsevier, vol. 35(6), pages 978-991.
    3. repec:rss:jnljee:v3i4p7 is not listed on IDEAS

    More about this item

    Keywords

    Cointegration test; Money demand;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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