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Error Correction Model of the Demand for Money in Pakistan


  • Qayyum, Abdul


The paper estimated dynamic demand for money (Currency) function for Pakistan. it is concluded that in the long run money demand depends on income, rate of inflation and bond rate. The rate of Inflation and rate of interst on deposits emerged as important determinant of money demand in the short run. Moreover dynamic model remans stable througtout the study period.

Suggested Citation

  • Qayyum, Abdul, 1998. "Error Correction Model of the Demand for Money in Pakistan," MPRA Paper 2582, University Library of Munich, Germany, revised 1998.
  • Handle: RePEc:pra:mprapa:2582

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    References listed on IDEAS

    1. Lewis, Kenneth A & Breen, Francis F, 1975. "Empirical Issues in the Demand for Currency: A Multinational Study," Journal of Finance, American Finance Association, vol. 30(4), pages 1065-1079, September.
    2. Johansen, Soren, 1992. "Testing weak exogeneity and the order of cointegration in UK money demand data," Journal of Policy Modeling, Elsevier, vol. 14(3), pages 313-334, June.
    3. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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    Cited by:

    1. Adnan Haider & Asad Jan & Kalim Hyder, 2013. "On the (Ir)Relevance of Monetary Aggregate Targeting in Pakistan: An Eclectic View," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 18(2), pages 65-119, July-Dec.
    2. Abdul Qayyum, 2005. "Modelling the Demand for Money in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(3), pages 233-252.
    3. Siffat Mushtaq & Abdul Rashid & Abdul Qayyum, 2012. "On the Welfare Cost of Inflation: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(1), pages 61-96.

    More about this item


    Error Correction; Cointegration; Unit root; money demand; Pakistan;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money


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