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Error-Correction Based Panel Estimates of the Demand for Money of Selected Asian Countries with the Extreme Bounds Analysis

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  • Rao, B. Bhaskara
  • Kumar, Saten

Abstract

This paper uses the extreme bounds analysis (EBA) of Leamer (1983 &1985) to analyze the robust determinants of the demand for money in a panel of 17 Asian countries for the period 1970 to 2009. These robust determinants are found to be unit root variables. Therefore, cointegration between these variables is tested with a recent time series panel method developed by Westerlund (2007). This method uses the error-correction formulation and has more power against the null of no cointegration. The results show that there is a well-defined long-run demand for money. Using the lagged error correction term from the estimated cointegrating equation, the short-run dynamic relationships are estimated. This paper, thus, suggests some useful guidelines to estimate other relationships with panel data.

Suggested Citation

  • Rao, B. Bhaskara & Kumar, Saten, 2010. "Error-Correction Based Panel Estimates of the Demand for Money of Selected Asian Countries with the Extreme Bounds Analysis," MPRA Paper 27263, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:27263
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    2. Afees Salisu & Idris Ademuyiwa & Basiru Fatai, 2013. "Modelling the Demand for Money in Sub-Saharan Africa (SSA)," Economics Bulletin, AccessEcon, vol. 33(1), pages 635-647.
    3. Mouyad Alsamara & Zouhair Mrabet, 2019. "Asymmetric impacts of foreign exchange rate on the demand for money in Turkey: new evidence from nonlinear ARDL," International Economics and Economic Policy, Springer, vol. 16(2), pages 335-356, April.
    4. Ahmad Baharumshah & Siew-Voon Soon, 2015. "Demand for broad money in Singapore: does wealth matter?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(3), pages 557-573, July.
    5. Harmindar B. Nath & Vasilis Sarafidis, 2017. "Does persistence in idiosyncratic risk proxy return-reversals?," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 2(8), pages 27-53, October.
    6. Gerlach-Kristen, Petra & O'Connell, Brian & O'Toole, Conor, 2013. "How do banking crises affect aggregate consumption? Evidence from international crisis episodes," Papers WP464, Economic and Social Research Institute (ESRI).
    7. Ufuk CAN & Zeynep Gizem CAN & Süleyman DEĞİRMEN, 2019. "Paranın Dolaşım Hızının ve Para Talebi Fonksiyonunun Ekonometrik Analizi: Türkiye Örneği," Istanbul Business Research, Istanbul University Business School, vol. 48(2), pages 218-247, November.
    8. César Carrera & Jairo Flores, 2017. "Modelling and forecasting money demand: divide and conquer," Working Papers 2017-91, Peruvian Economic Association.

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    More about this item

    Keywords

    Demand for money; Extreme bounds analysis; Panel ECM; Structural breaks;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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