Money Demand in Nigeria: Application of Autoregressive Distributed Lag (ARDL) Approach

Manasseh, Charles O.; Nwakoby, Ifeoma C.; Abada, Felicia C.; Alio, Felix C.; Okanya, Ogochukwu

doi:10.18488/journal.aefr.2021.114.308.321

Cited by 2 publications

(4 citation statements)

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“…The augmented money demand function is income elastic but inelastic for the interest rate, price level, and exchange rate. The positive effect of the price level can be described to align with the findings of Authors [29], while the negative impact of the exchange rate on the money demand function aligns with the results of authors [12,24].…”

Section: Robust Ordinary Least Squares (Ols) Estimationsupporting

confidence: 86%

“…The elasticity of the money demand function for payment can be seen in how the change in money demand is far more significant than the change in income. This result of a positive effect of income and a negative effect of interest rate on the money demand function is to the findings of studies like Authors [1,12,15,29,36].…”

Section: Robust Ordinary Least Squares (Ols) Estimationsupporting

confidence: 84%

“…For Authors [1], the role of the domestic price level, expected exchange rate depreciation, and foreign interest rate is crucial variables to consider. Similar to the case of Authors [12], the role of the exchange rate and inflation rate was also considered by Authors [29] as being critical variables in the money demand function. The study of Authors [24] further thought consumer price index, exchange rate, and credit to the private sector, in addition to income and interest rate, are the determinants of money demand.…”

Section: Introductionmentioning

confidence: 88%

“…Authors [29] used quarterly data from 1981-Q1 to 2018-Q4 to estimate a broad money demand function. The co-integration test was conducted using the autoregressive distributed lag/bounds test model.…”

Section: Review Of Related Literaturementioning

confidence: 99%

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An Estimation of Money Demand Function Using Nigerian Data: Implication for Monetary Policy

Iriabije

Effiong²

2022

PoS

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This study estimated Nigeria's Keynesian and augmented money demand function using time series variables from 1986 through 2021. The Keynesian money demand function is estimated by considering income and interest rates as the determinants of the money demand function. In contrast, the augmented money demand function incorporates critical variables like exchange rate, income, and interest rates. With the Robust Ordinary Least Squares estimation method, the income level exerted a positive and significant effect on money demand, while interest rate put forth a negative but insignificant impact. The a priori signs of these two variables align with the Keynesian postulation that income directly correlates with the actual money demand function. At the same time, the rate of interest has an inverse relationship.Further findings from the augmented money demand function, as reported by the autoregressive distributed lag short-run estimates, indicate that the price level and exchange rate directly and significantly affect Nigeria's current money demand function. The money demand function so estimated was reported to be stable, given the cumulative sum of squares result. A general conclusion that can be drawn from the findings is that the money demand function is income elastic but inelastic regarding interest rate, price level, and exchange rate.

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Section: Robust Ordinary Least Squares (Ols) Estimationsupporting

confidence: 86%

Section: Robust Ordinary Least Squares (Ols) Estimationsupporting

confidence: 84%

Section: Introductionmentioning

confidence: 88%

Section: Review Of Related Literaturementioning

confidence: 99%

See 2 more Smart Citations