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

  • Rao, B. Bhaskara
  • Kumar, Saten

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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27263.

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Date of creation: 06 Dec 2010
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Handle: RePEc:pra:mprapa:27263
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