Role of Advertising Expenditure as an Influential Non-traditional Regressor in Russia’s Money Demand Specification

Abstract

The term advertising refers to the strategy that affects consumer behaviour and induces higher household final consumption expenditure (HFCE), which is associated with incredibly demanding for money upon transaction usages and a reduction in search costs. The model of money demand that is stable, reliable and well defined is crucial for central banks in formulating their monetary policy to minimise the gap between the supply and demand of money. Hence, this paper examines the influence of expenditure in advertising (ADEX) towards the level of demand for money among the households in Russia. An approach known as Autoregressive distributed lag (ARDL) is opted to model the money demand function (MDF) of Russia and nine years of quarterly data from 2008 to 2016 have been used in the estimation. Empirical findings reveal that ADEX not only positively influences the Russian’s money demand in long term, its MDF also becomes more superior when the ADEX has been added. As such, this study suggests that ADEX can be taken into account as a non-traditional explanatory variable in the formulation of a stable and well-specified MDF for the case in Russia.

Economic Uncertainty and the Demand for Broad Money in South Africa

“…Other than exchange rate, other studies explored this field with other factors or different perspectives. For example, Hiew et al (2013) and Hiew et al (2019) tested the traditional MDF with advertising expenditure as a new regressor for the case of Indonesia and Russia. Leong et al (2010) and Puah et al (2018) revisited the MDF by comparing simple-sum and Divisia monetary aggregates.…”