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

  • B Bhaskara Rao

    (University of the South Pacific)

  • Rup Singh

    (University of the South Pacific)

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.

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File URL: http://econwpa.repec.org/eps/mac/papers/0511/0511012.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 0511012.

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Length: 20 pages
Date of creation: 11 Nov 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0511012
Note: Type of Document - pdf; pages: 20
Contact details of provider: Web page: http://econwpa.repec.org

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  1. 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 661-92, December.
  2. Poole, William, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, MIT Press, vol. 84(2), pages 197-216, May.
  3. Subramanian S. Sriram, 1999. "Survey of Literatureon Demand for Money; Theoretical and Empirical Work with Special Reference to Error-Correction Models," IMF Working Papers 99/64, International Monetary Fund.
  4. 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.
  5. 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 449-59, October.
  6. David F. Hendry & Neil R. Ericsson, 1990. "Modeling the demand for narrow money in the United Kingdom and the United States," International Finance Discussion Papers 383, Board of Governors of the Federal Reserve System (U.S.).
  7. Rao, B. Bhaskara, 1993. "Unit root hypothesis, new classical and Keynesian models," Economics Letters, Elsevier, vol. 41(1), pages 47-52.
  8. 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.
  9. 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.
  10. 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.
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