The role of money demand in monetary policy
Date
2019
Authors
Dossou, Theresah D.
University of Lethbridge. Faculty of Arts and Science
Journal Title
Journal ISSN
Volume Title
Publisher
Lethbridge, Alta. : University of Lethbridge, Department of Economics
Abstract
This study uses cross-sectional time-series data from five (5) countries in estimating a money demand function. We found valid and consistent results for the money demand model and established a stable long run relationship between money demand and its regressors: real output, exchange rate, inflation rate and long and short-term interest rate. Stability tests conducted showed the presence of structural breaks possibly due to changes in monetary regimes and other financial deregulations.
Money demand elasticities play a vital role in monetary policy formulation and the existence of a stable demand for money is very important, even in the use of inflation targeting, for the conduct of monetary policy even though its impact may not be explicitly seen.
Description
Keywords
cointegration , elasticity , monetary policy , money demand , stability , Dissertations, Academic