IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpma/0511012.html
   My bibliography  Save this paper

A Cointegration And Error Correction Approach To Demand For Money In Fiji: 1971-2002

Author

Listed:
  • B Bhaskara Rao

    (University of the South Pacific)

  • Rup Singh

    (University of the South Pacific)

Abstract

Demand for money is an important macroeconomic relationship. Its stability has implications for the choice of monetary policy targets. This paper estimates demand for narrow money in Fiji and evaluates its robustness and stability. It is found that there is a well determined stable demand for money in Fiji, for three decades, from 1971 to 2002 and its dynamics are adequately captured by the cointegration and error- correction models. Income and interest rate elasticities are found to be significant.

Suggested Citation

  • B Bhaskara Rao & Rup Singh, 2005. "A Cointegration And Error Correction Approach To Demand For Money In Fiji: 1971-2002," Macroeconomics 0511012, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0511012
    Note: Type of Document - pdf; pages: 20
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0511/0511012.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. R. W. Hafer & Ali Kutan, 2001. "Financial Innovation And The Demand For Money: Evidence From The Philippines," International Economic Journal, Taylor & Francis Journals, vol. 17(1), pages 17-27.
    2. William Poole, 1969. "Optimal choice of monetary policy instruments in a simple stochastic macro model," Special Studies Papers 2, Board of Governors of the Federal Reserve System (U.S.).
    3. Mr. Subramanian S Sriram, 1999. "Survey of Literature on Demand for Money: Theoretical and Empirical Work with Special Reference to Error-Correction Models," IMF Working Papers 1999/064, International Monetary Fund.
    4. Rao, B. Bhaskara, 1993. "Unit root hypothesis, new classical and Keynesian models," Economics Letters, Elsevier, vol. 41(1), pages 47-52.
    5. Hendry, David F. & Ericsson, Neil R., 1991. "Modeling the demand for narrow money in the United Kingdom and the United States," European Economic Review, Elsevier, vol. 35(4), pages 833-881, May.
    6. Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(352), pages 661-692, December.
    7. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    8. Pantula, Sastry G & Gonzalez-Farias, Graciela & Fuller, Wayne A, 1994. "A Comparison of Unit-Root Test Criteria," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(4), pages 449-459, October.
    9. William Poole, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, Oxford University Press, vol. 84(2), pages 197-216.
    10. Pradhan, Basanta K. & Subramanian, A., 2003. "On the stability of demand for money in a developing economy: Some empirical issues," Journal of Development Economics, Elsevier, vol. 72(1), pages 335-351, October.
    11. Friedman, Milton & Schwartz, Anna J, 1991. "Alternative Approaches to Analyzing Economic Data," American Economic Review, American Economic Association, vol. 81(1), pages 39-49, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. B. Bhaskara Rao, 2007. "Estimating short and long-run relationships: a guide for the applied economist," Applied Economics, Taylor & Francis Journals, vol. 39(13), pages 1613-1625.
    2. Lawrence U. Okoye & Alexander E. Omankhanlen & Johnson I. Okoh & Ngozi B. Adeleye & Felix N. Ezeji & Gideon K. Ezu & Benjamin I. Ehikioya, 2021. "Analyzing the Energy Consumption and Economic Growth Nexus in Nigeria," International Journal of Energy Economics and Policy, Econjournals, vol. 11(1), pages 378-387.
    3. Nidhal Mgadmi & Helmi Hamdi & Houssem Rachdi, 2016. "Non-Linear Modelling of Money Demand in Tunisia: Evidence from the STAR Model," Economics Bulletin, AccessEcon, vol. 36(4), pages 1975-1985.
    4. Yutaka Kurihara, 2016. "Demand for money under low interest rates in Japan," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 4(4), pages 12-19, August.
    5. 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.
    6. T. Jayaraman & Chee-Keong Choong, 2009. "How does monetary policy transmission mechanism work in Fiji?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 56(2), pages 145-161, June.
    7. 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 Limited, vol. 27(3), pages 211-222, August.
    8. T.K. Jayaraman & Chee‐Keong Choong, 2008. "Exchange market pressure in a small Pacific Island country: a study of Fiji: 1975‐2005," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 35(12), pages 985-1004, October.
    9. P K Narayan & S Narayan, 2008. "Estimating the Demand for Money in an Unstable Open Economy: The Case of the Fiji Islands," Economic Issues Journal Articles, Economic Issues, vol. 13(1), pages 71-91, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rup Singh & Saten Kumar, 2012. "Application of the alternative techniques to estimate demand for money in developing countries," Journal of Developing Areas, Tennessee State University, College of Business, vol. 46(2), pages 43-63, July-Dece.
    2. B. Bhaskara Rao & Rup Singh, 2006. "Demand for money in India: 1953-2003," Applied Economics, Taylor & Francis Journals, vol. 38(11), pages 1319-1326.
    3. Saten Kumar & Don J. Webber, 2013. "Australasian money demand stability: application of structural break tests," Applied Economics, Taylor & Francis Journals, vol. 45(8), pages 1011-1025, March.
    4. Kumar, Saten & Manoka, Billy, 2008. "Testing the Stability of Demand for Money in Tonga," MPRA Paper 19300, University Library of Munich, Germany.
    5. Sophie van Huellen & Duo Qin & Shan Lu & Huiwen Wang & Qing Chao Wang & Thanos Moraitis, 2022. "Modelling opportunity cost effects in money demand due to openness," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 697-744, January.
    6. Singh, Prakash & Pandey, Manoj K., 2009. "Structural break, stability and demand for money in India," MPRA Paper 15425, University Library of Munich, Germany.
    7. Simplice Asongu & Oludele Folarin & Nicholas Biekpe, 2019. "The stability of demand for money in the proposed Southern African Monetary Union," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 15(2), pages 222-244, August.
    8. K. Cuthbertson & D. Nitzsche & S. Hyde, 2007. "Monetary Policy And Behavioural Finance," Journal of Economic Surveys, Wiley Blackwell, vol. 21(5), pages 935-969, December.
    9. Kumar, Saten, 2011. "Financial reforms and money demand: Evidence from 20 developing countries," Economic Systems, Elsevier, vol. 35(3), pages 323-334, September.
    10. Folarin, Oludele E. & Asongu, Simplice A., 2019. "Financial liberalization and long-run stability of money demand in Nigeria," Journal of Policy Modeling, Elsevier, vol. 41(5), pages 963-980.
    11. 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 Limited, vol. 27(3), pages 211-222, August.
    12. Adolfo Sachsida & Mário Jorge Cardoso de Mendonça, 2006. "Domestic Saving and Investment Revised: Can the Feldstein-Horioka Equation be Used for Policy Analysis?," Discussion Papers 1158, Instituto de Pesquisa Econômica Aplicada - IPEA.
    13. Ali, Issa, 2017. "Estimating the demand for money in Libya: An application of the Lagrange multiplier structural break unit root test and the ARDL cointegration approach," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 46, pages 126-138.
    14. Saten Kumar & Mamta B. Chowdhury & B. Bhaskara Rao, 2013. "Demand for money in the selected OECD countries: a time series panel data approach and structural breaks," Applied Economics, Taylor & Francis Journals, vol. 45(14), pages 1767-1776, May.
    15. Faust, Jon & Whiteman, Charles H., 1997. "General-to-specific procedures for fitting a data-admissible, theory-inspired, congruent, parsimonious, encompassing, weakly-exogenous, identified, structural model to the DGP: A translation and criti," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 47(1), pages 121-161, December.
    16. Prof. Neil D. Karunaratne, 2000. "Inflation Targeting Macroeconomic Distortions and the Policy Reaction Function," Discussion Papers Series 269, School of Economics, University of Queensland, Australia.
    17. Castle, Jennifer L. & Fawcett, Nicholas W.P. & Hendry, David F., 2010. "Forecasting with equilibrium-correction models during structural breaks," Journal of Econometrics, Elsevier, vol. 158(1), pages 25-36, September.
    18. Nikolaos Dritsakis, 2011. "Demand for Money in Hungary: An ARDL Approach," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 01-16, November.
    19. 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.
    20. Haider Mahmood & Tarek Tawfik Yousef Alkhateeb, 2018. "Asymmetrical effects of real exchange rate on the money demand in Saudi Arabia: A non-linear ARDL approach," PLOS ONE, Public Library of Science, vol. 13(11), pages 1-12, November.

    More about this item

    Keywords

    Demand for money; Monetary policy; Income and interest rate elasticities; Cointegration; Error correction; Unit roots; Stability.;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:0511012. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.