Estimating money demand function of Bangladesh
Although money demand equations have been estimated for many western countries, yet only recently many researchers have investigated the demand for money in mixed economies like Bangladesh. Co-integration technique is now a common method of estimating any money demand function. This paper empiric...
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BRAC University
2012
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10361-17992019-09-29T05:48:14Z Estimating money demand function of Bangladesh Alam Miah, Md. Habibul Unit root Co-integration Money demand Stability Although money demand equations have been estimated for many western countries, yet only recently many researchers have investigated the demand for money in mixed economies like Bangladesh. Co-integration technique is now a common method of estimating any money demand function. This paper empirically analyses the stability of the narrow and broad money demand functions (M1, M2, and M3) in Bangladesh for the period 1999QI-2005QIIII. To determine whether the policy framework satisfies the necessary condition for effectiveness of monetary policy, the stability of Bangladeshi M1, M2, and M3 money demand is estimated and tested by employing a recent co-integration procedure proposed by Johansen-Juselius (2001). It is shown that even though M1 and M2 monetary aggregates are co-integrated with income, interest rate and nominal effective exchange rate, application of Cumulative Sum (CUSUM) and Cumulative Sum of Square (CUSUMSQ) tests to the residuals of an error-correction model reveal that it is unstable. 2012-05-02T09:04:01Z 2012-05-02T09:04:01Z 2011 Article http://hdl.handle.net/10361/1799 BRAC University Journal, BRAC University;Vol. 8, No. 1 & 2, 2011, p. 31-36 application/pdf BRAC University |
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Brac University |
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Institutional Repository |
| topic |
Unit root Co-integration Money demand Stability |
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Unit root Co-integration Money demand Stability Alam Miah, Md. Habibul Estimating money demand function of Bangladesh |
| description |
Although money demand equations have been estimated for many western countries, yet only
recently many researchers have investigated the demand for money in mixed economies like
Bangladesh. Co-integration technique is now a common method of estimating any money demand
function. This paper empirically analyses the stability of the narrow and broad money demand
functions (M1, M2, and M3) in Bangladesh for the period 1999QI-2005QIIII. To determine
whether the policy framework satisfies the necessary condition for effectiveness of monetary
policy, the stability of Bangladeshi M1, M2, and M3 money demand is estimated and tested by
employing a recent co-integration procedure proposed by Johansen-Juselius (2001). It is shown that
even though M1 and M2 monetary aggregates are co-integrated with income, interest rate and
nominal effective exchange rate, application of Cumulative Sum (CUSUM) and Cumulative Sum of
Square (CUSUMSQ) tests to the residuals of an error-correction model reveal that it is unstable. |
| format |
Article |
| author |
Alam Miah, Md. Habibul |
| author_facet |
Alam Miah, Md. Habibul |
| author_sort |
Alam Miah, Md. Habibul |
| title |
Estimating money demand function of Bangladesh |
| title_short |
Estimating money demand function of Bangladesh |
| title_full |
Estimating money demand function of Bangladesh |
| title_fullStr |
Estimating money demand function of Bangladesh |
| title_full_unstemmed |
Estimating money demand function of Bangladesh |
| title_sort |
estimating money demand function of bangladesh |
| publisher |
BRAC University |
| publishDate |
2012 |
| url |
http://hdl.handle.net/10361/1799 |
| work_keys_str_mv |
AT alammiahmdhabibul estimatingmoneydemandfunctionofbangladesh |
| _version_ |
1814308077975896064 |