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A Panel Data Approach to the Demand for Money and the Effects of Financial Reforms in the Asian Countries

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  • Rao, B. Bhaskara
  • Kumar, Saten

Abstract

Three panel data estimation methods are used to estimate the cointegrating equations for the demand for money (M1) in 14 developing Asian countries. Tests for the effects of financial reforms are made with estimates for two sub-samples of 1970-1985 and 1986-2005. Our results show that money demand functions in these Asian countries are stable and financial reforms have yet to have any significant effects. This implies that the central banks of these countries should use money supply, instead of the rate of interest, as the monetary policy instrument.

Suggested Citation

  • Rao, B. Bhaskara & Kumar, Saten, 2008. "A Panel Data Approach to the Demand for Money and the Effects of Financial Reforms in the Asian Countries," MPRA Paper 6565, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:6565
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    References listed on IDEAS

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    Cited by:

    1. Claudiu Tiberiu Albulescu & Dominique Pépin, 2018. "Money demand stability, monetary overhang and inflation forecast in the CEE countries," Working Papers hal-01720319, HAL.
    2. Folarin, Oludele & Asongu, Simplice, 2017. "Financial liberalization and long-run stability of money demand in Nigeria," MPRA Paper 81190, University Library of Munich, Germany.
    3. 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.
    4. repec:ksp:journ2:v:4:y:2017:i:2:p:167-192 is not listed on IDEAS
    5. Kumar, Saten & Rao, B. Bhaskara, 2012. "Error-correction based panel estimates of the demand for money of selected Asian countries with the extreme bounds analysis," Economic Modelling, Elsevier, vol. 29(4), pages 1181-1188.
    6. Kumar, Saten, 2011. "Financial reforms and money demand: Evidence from 20 developing countries," Economic Systems, Elsevier, vol. 35(3), pages 323-334, September.
    7. Rao, B. Bhaskara & Tamazian, Artur & Singh, Rup & Vadlamannati, Krishna Chaitanya, 2008. "Financial developments and the rate of growth of output: An alternative approach," MPRA Paper 8605, University Library of Munich, Germany.
    8. Rana Ejaz Ali Khan & Qazi Muhammad Adnan Hye, 2013. "Financial liberalization and demand for money: a case of Pakistan," Journal of Developing Areas, Tennessee State University, College of Business, vol. 47(2), pages 175-198, July-Dece.
    9. Dobnik, Frauke, 2011. "Long-run Money Demand in OECD Countries – Cross-Member Cointegration," Ruhr Economic Papers 237, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    10. Rup Singh & Saten Kumar, 2010. "Some empirical evidence on the demand for money in the Pacific Island countries," Studies in Economics and Finance, Emerald Group Publishing, vol. 27(3), pages 211-222, August.
    11. J Paul Dunne and Elizabeth Kasekende, 2016. "Financial Innovation and Money Demand: Evidence from Sub-Saharan Africa," Working Papers 583, Economic Research Southern Africa.
    12. Felix S. Nyumuah, 2017. "An Investigation into the Interest Elasticity of Demand for Money in Developing Countries: A Panel Data Approach," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(3), pages 69-80, March.
    13. Frauke Dobnik, 2013. "Long-run money demand in OECD countries: what role do common factors play?," Empirical Economics, Springer, vol. 45(1), pages 89-113, August.
    14. Lee, Chien Chiang & Chang, Chun Ping, 2012. "The Demand for Money in China: A Reassessment Using the Bounds Testing Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 74-94, March.
    15. Kumar, Saten & Singh, Rup, 2009. "Some Empirical Evidence on the Demand for Money in the Pacific Island Countries," MPRA Paper 18703, University Library of Munich, Germany.
    16. Abdullah, Muhammad & Chani, Muhammad Irfan & Ali, Amjad, 2012. "Determinants of Money Demand in Pakistan: Disaggregated Expenditure Approach," MPRA Paper 50977, University Library of Munich, Germany, revised 2013.
    17. El-Shazly, Alaa, 2016. "Structural breaks and monetary dynamics: A time series analysis," Economic Modelling, Elsevier, vol. 53(C), pages 133-143.
    18. Mohammed Nur HUSSAIN & Nam HOANG, 2014. "Effects of Fiscal, Monetary, and Exchange rate policies on Output in 12 Asian Economies, 1974-2007," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 14(2).
    19. Zahra Rouhani & Mehdi Behname & Sayed Mahdi Mostafavi, 2013. "A Comparative Study For Opportunity Cost Of Holding Money Between Selected Developing And Developed Countries," Romanian Economic Business Review, Romanian-American University, vol. 8(4), pages 7-17, december.
    20. Lee, Chien-Chiang & Chiu, Yi-Bin, 2011. "Oil prices, nuclear energy consumption, and economic growth: New evidence using a heterogeneous panel analysis," Energy Policy, Elsevier, vol. 39(4), pages 2111-2120, April.
    21. Rao, B. Bhaskara & Tamazian, Artur & Singh, Prakash, 2009. "Demand for Money in the Asian Countries: A Systems GMM Panel Data Approach and Structural Breaks," MPRA Paper 15030, University Library of Munich, Germany.

    More about this item

    Keywords

    Pedroni; Mark and Sul and Breitung methods; Demand for money; Asian countries; Effects of financial reforms and Choice of monetary policy instruments;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

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