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

  • Rao, B. Bhaskara
  • Kumar, Saten

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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6565.

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Date of creation: 07 Jan 2008
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Handle: RePEc:pra:mprapa:6565
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  1. M. Sumner, 2009. "Demand for money in Thailand," Applied Economics, Taylor & Francis Journals, vol. 41(10), pages 1269-1276.
  2. Jerry Coakley & Ana-Maria Fuertes & Fabio Spagnolo, 2004. "Is the Feldstein-Horioka Puzzle History?," Manchester School, University of Manchester, vol. 72(5), pages 569-590, 09.
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  7. Christian Dreger & Hans-Eggert Reimers & Barbara Roffia, 2007. "Long-Run Money Demand in the New EU Member States with Exchange Rate Effects," Eastern European Economics, M.E. Sharpe, Inc., vol. 45(2), pages 75-94, April.
  8. Jerry Coakley & Ana-Maria Fuertes & Fabio Spagnolo, 2004. "The Feldstein-Horioka puzzle is not as bad as you think," Money Macro and Finance (MMF) Research Group Conference 2003 17, Money Macro and Finance Research Group.
  9. Joakim Westerlund, 2006. "Testing for Panel Cointegration with Multiple Structural Breaks," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(1), pages 101-132, 02.
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  11. Peter Pedroni, 2004. "Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis," Department of Economics Working Papers 2004-15, Department of Economics, Williams College.
  12. Mohsen Bahmani-Oskooee & Hafez Rehman, 2005. "Stability of the money demand function in Asian developing countries," Applied Economics, Taylor & Francis Journals, vol. 37(7), pages 773-792.
  13. B Bhaskara Rao, 2005. "The Nature of the ADAS Model Based on the ISLM Model," Macroeconomics 0510001, EconWPA.
  14. Kaddour Hadri, 2000. "Testing for stationarity in heterogeneous panel data," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 148-161.
  15. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  16. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I.
  17. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
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