Some empirical evidence on the demand for money in the Pacific Island countries

Abstract

This paper explores the stability of the demand for narrow money in the Pacific Island Countries viz, Fiji, Vanuatu, Samoa, Solomons and Papua New Guinea (PNG). The results from the time series approaches of LSE-Hendry's General to Specific (GETS) and Johansen's Maximum Likelihood (JML) suggest that real income, nominal rate of interest and real narrow money, are cointegrated. The CUSUM and CUSUMSQ stability test results indicate that the demand for money functions for these countries are stable and therefore the respective monetary authorities may consider targeting money supply in their conduct of monetary policy.

Determinants of Demand For Money and The Velocity of Money in Indonesia

“…The study of Singh and Kumar, (2010) on money demand in Pacific Island countries (Fiji, Vanuatu, Samoa, Solomons and the Papua New Guinea. Conclusion of the research by Singh and Kumar, (2010) states that the demand for money for the country is stable. Monetary authorities respectively can consider in monetary policy.…”

Demand for money under low interest rates in Japan

“…Rao and Kumar (2011) showed that US demand for money has been stable. Singh and Kumar (2010) found that real income, nominal interest rate, and narrow money are cointegrated and demand for money is stable. Avouyi-Dovi, Drumetz, and Sahuc (2012) showed that money demand function is unstable for the Euro area by using vector error correction model.…”