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On Stability of the Demand for Money in a Developing OECD

Author

Listed:
  • Ferda HALICIOGLU

    (The University of Greenwich)

  • Mehmet UGUR

    (The University of Greenwich)

Abstract

This paper empirically analyses the stability of the narrow money demand function (M1) in Turkey for the period 1950-2002. As part of the IMF-sponsored stabilisation programme, Turkey has been pursuing base money targets. To ascertain whether this policy framework satisfies the necessary condition for effectiveness, we estimate and test for the stability of Turkish M1 by employing a recent single cointegration procedure proposed by Pesaran et al. (2001) along with the CUSUM and CUSUMSQ stability tests. We demonstrate that there is a stable money demand function and it could be used as an intermediate target of monetary policy in Turkey.

Suggested Citation

  • Ferda HALICIOGLU & Mehmet UGUR, 2005. "On Stability of the Demand for Money in a Developing OECD," Macroeconomics 0508001, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpma:0508001
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    References listed on IDEAS

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    3. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    4. Subramanian S Sriram, 1999. "Demand for M2 in an Emerging-Market Economy; An Error-Correction Model for Malaysia," IMF Working Papers 99/173, International Monetary Fund.
    5. Bahmani-Oskooee, Mohsen & Bohl, Martin T., 2000. "German monetary unification and the stability of the German M3 money demand function," Economics Letters, Elsevier, vol. 66(2), pages 203-208, February.
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    Cited by:

    1. repec:sae:globus:v:18:y:2017:i:4:p:811-824 is not listed on IDEAS
    2. Muhammad Ahad, 2017. "Financial Development and Money Demand Function: Cointegration, Causality and Variance Decomposition Analysis for Pakistan," Global Business Review, International Management Institute, vol. 18(4), pages 811-824, August.
    3. repec:ksp:journ2:v:4:y:2017:i:2:p:167-192 is not listed on IDEAS
    4. repec:rfh:bbejor:v:6:y:2017:i:1:p:45-57 is not listed on IDEAS
    5. repec:eco:journ1:2017-05-39 is not listed on IDEAS

    More about this item

    Keywords

    co-integration; money demand; stability; Turkey;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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