Financial liberalization and money demand in the ASEAN countries

Dekle, Robert; Pradhan, Mahmood

doi:10.1002/(sici)1099-1158(199907)4:3<205::aid-ijfe107>3.0.co;2-g

Cited by 29 publications

(33 citation statements)

References 10 publications

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“…However, in many developing countries demand for money may rise over time because of increasing monetization (departure from barter trade in agrarian economies) of the economy and financial deepening (Melnick 1995). So, financial innovation can in principle change the demand for money in either direction (see also Dekle and Pradhan 1999; 4 . Furthermore there can be shifts between the various categories of money.…”

Section: Conceptual Framework and Review Of Literaturementioning

confidence: 99%

Financial Liberalization and Demand for Money: A Case of Pakistan

Khan¹,

Hye²

2013

jda

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Literature in economics has identified many channels through which the financial liberalization may affect demand for money. There are evidences of stability as well as instability of demand for money due to financial development for developing economies. The objective of the current study is to examine the effect of financial liberalization on demand for money in Pakistan, i.e. whether financial liberalization has affected the demand for money or not. The issue is important as stable demand for money function is a prerequisite for formulating and operating monetary policy. To achieve the objective JJ cointegration and auto regressive distributed lag (ARDL) to the cointegration is employed to estimate the long-run equilibrium relationship between broad money M 2 and composite financial liberalization index along with other determinants of demand for money like gross domestic product, real deposit rate and exchange rate. In order to assess the stability of the model, the parameter constancy tests, i.e. recursive residuals, CUSUM and CUSUMSQ tests have been applied. The empirical results indicated that for broad money, there exists long-run money demand function. The financial liberalization, gross domestic product and real deposit rate positively affect the demand for money in the long as well as short-run. JEL Classification: E41; E58; E52; O53; F31.

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Section: Conceptual Framework and Review Of Literaturementioning

confidence: 99%

Financial Liberalization and Demand for Money: A Case of Pakistan

Khan¹,

Hye²

2013

jda

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“…However using CUSUM SQUARES stability tests, the money demand functions for India, Malaysia and Pakistan showed some instability. Price and Insukindro (1994) Other studies on money demand for Indonesia are Dekle and Pradhan (1997), McNelis (1998), James (2005) and Narayan (2007). The recent studies by James (2005) and Narayan (2007) argue that financial liberalization plays a key role in determining money demand and its fluctuations in Indonesia.…”

Section: Countriesmentioning

confidence: 99%

“…The recent studies by James (2005) and Narayan (2007) argue that financial liberalization plays a key role in determining money demand and its fluctuations in Indonesia. Dekle and Pradhan (1997) We use the standard Keynesian specification of demand for money in which demand for real narrow money is a function of real income and the nominal rate of interest. The interest rate measures the opportunity cost of holding money.…”

Section: Countriesmentioning

confidence: 99%

Application Of The Alternative Techniques To Estimate Demand For Money In Developing Countries

Singh¹,

Kumar²

2012

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In this paper, we applied alternative time series techniques and obtained similar summaries of demand for money relations for twelve developing countries. This indicates that adequate attention should be paid to the purpose of research and interpretation of results rather than to econometric techniques. We also find that income elasticities are close to unity for almost all of our sample countries and the interest rate elasticities are well determined and significant. Further, it is shown that demand for money in these countries is temporally stable and therefore the respective monetary authorities may target money supply as opposed to the rate of interest.

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“…The Malaysian economy has evolved in line with the liberalization and globalization processes and witnesses widespread changes in the conduct of monetary policy and the choice of monetary policy regime (see for example Tseng and Corker, 1991;Dekle and Pradhan, 1997;Athukorala, 2001;McCauley, 2006;Umezaki, 2006). 3 In the mid-1980s, while maintaining a managed float exchange rate system, the conduct of monetary policy by Bank Negara Malaysia (BNM), not only depended on inflation and real output but also on foreign monetary policy (see Cheong, 2004;Umezaki, 2006, for details).…”

Section: The Evolution Of the Malaysian Economymentioning

confidence: 99%

“…Subsequent developments in the economy and the globalization of financial markets in the early 1990s however weakened the relationship between monetary aggregates and the target variables of income and prices (see for example Tseng and Corker, 1991;Dekle and Pradhan, 1997). Around this time, the globalization process also caused notable shifts in the financing pattern of the economy, that is moving from an interestinelastic market (government securities market) to a more interest rate sensitive market (bank credit and capital market).…”

Section: The Evolution Of the Malaysian Economymentioning

confidence: 99%