Demand for Real Money Balances by the Business Sector: An Econometric Investigation
The objective of this paper has been to estimate dynamic demand for money function for the business sector in Pakistan. It is found that the individual time series of the variables included in the money demand function are not stationary. They are integrated of order one. Further it is concluded that the one cointegration relationship between money demand and its determinants. The rate of inflation emerged as important determinant of real money balances demand by the business sector. In the long run business sector give no importance to the rate of interest while holding money.We have estimated dynamic stable money demand functions, which have remarkably good predictive power. In the short run rate of interest on saving deposit emerged an important determinant of money demand by the business sector. The previous money demand behaviour also plays an important role in the determination of current behaviour.
|Date of creation:||2000|
|Date of revision:||2000|
|Publication status:||Published in The Pakistan Development Review 4.39(2000): pp. 857-873|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Bera, Anil K. & Jarque, Carlos M., 1982. "Model specification tests : A simultaneous approach," Journal of Econometrics, Elsevier, vol. 20(1), pages 59-82, October.
- Ungar, Meyer & Zilberfarb, Benzion, 1980. " The Demand for Money by Firms: The Stability and Other Issues Reexamined," Journal of Finance, American Finance Association, vol. 35(3), pages 779-85, June.
- Hendry, David F. & Pagan, Adrian R. & Sargan, J.Denis, 1984. "Dynamic specification," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 18, pages 1023-1100 Elsevier.
- Wilbratte, Barry J, 1975. "Some Essential Differences in the Demand for Money by Households and by Firms," Journal of Finance, American Finance Association, vol. 30(4), pages 1091-99, September.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Phillips, P C B, 1987.
"Time Series Regression with a Unit Root,"
Econometric Society, vol. 55(2), pages 277-301, March.
- Tom Doan, . "PPUNIT: RATS procedure to perform Phillips-Perron Unit Root test," Statistical Software Components RTS00160, Boston College Department of Economics.
- Peter C.B. Phillips, 1985. "Time Series Regression with a Unit Root," Cowles Foundation Discussion Papers 740R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1986.
- Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Qayyum, Abdul, 1999. "Demand for Money By Business Sector in a Developing Country: Evidence from Pakistan," MPRA Paper 2583, University Library of Munich, Germany, revised 0199.
- Granger, C. W. J., 1981. "Some properties of time series data and their use in econometric model specification," Journal of Econometrics, Elsevier, vol. 16(1), pages 121-130, May.
- James Tobin, 1956. "Liquidity Preference as Behavior Towards Risk," Cowles Foundation Discussion Papers 14, Cowles Foundation for Research in Economics, Yale University.
- Stock, James H, 1987. "Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors," Econometrica, Econometric Society, vol. 55(5), pages 1035-56, September.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:2156. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.