The impact of financial innovations on the demand for money in the UK and Canada

Arestis, Philip; Hadjimatheou, George; Zis, George

doi:10.1080/758536015

Cited by 10 publications

(7 citation statements)

References 26 publications

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“…Compared with other components of gross national product (GNP), consumption is more money intensive and it is the natural observable proxy for the unobservable permanent income if permanent income is an estimation or measurement for wealth, as argued by Mankiw and Summers (1986). The level of consumption also outperformed other proxies of the scale variable for the MDF (refer to Arestic et al, 1992;Arrau et al, 1995;and Howells & Hussein, 1997). The constructiveness of consumption thus will be employed in line with the practice by Thomas (1993), Fujiki and Mulligan (1996), Tlelima and Turner (2004), Tang (2002Tang ( , 2004Tang ( , 2007, and Albuquerque and Gouvea (2009), to name few.…”

Section: Data Descriptions and Methodologymentioning

confidence: 99%

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

Hiew¹,

Puah

Arip

et al. 2019

IJFR

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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.

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Section: Data Descriptions and Methodologymentioning

confidence: 99%

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

Hiew¹,

Puah

Arip

et al. 2019

IJFR

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“…The theoretical study of relationships between FD and MPE can be traced back to Gurley and Shaw (1955;1967), Taylor (1987), Hendry and Ericsson (1991), Arestis et al (1992), and Mullineux (1994), among others. In more recent studies, the large body of literature has focused on the credit channel theory as proposed by Bernanke and Gertler (1995) which posits that the higher level of financial frictions is generally associated with stronger transmission mechanism of monetary policy.…”

Section: Literature Reviewmentioning

confidence: 99%

Financial Development and the Effectiveness of Monetary Policy: New Evidence from Malaysia

Basa

Karim

Zaidi

2019

AAMJ

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This paper examines the relationship between financial development (FD) and the monetary policy effectiveness (MPE) in Malaysia. Two indicators designate the level of FD, namely liquid liabilities and stock market capitalisation, and gross fixed capital formation are used in estimating the determinants of MPE which is generated using structural vector auto regressive (SVAR) in an open economy approach. Accordingly, an autoregressive distributed lag (ARDL) model is used in examining the effects of FD and gross fixed capital formation on MPE. Using a yearly time series data spanning from 1991 to 2016, the results revealed that there is a cointegration between FD and gross fixed capital formation on MPE. Interestingly, FD has a negatively significant effect on MPE on output and inflation, which indicates that a more developed financial system has hindered the effectiveness of the monetary policy.

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“…However, due to limited availability of data related to the modern payment technology in most developing countries, various proxies have been used in the literature to take into account the process of financial innovation. Arestis, Hadjimatheou, & Zis (1992), Arrau & De Gregorio (1993) and Arrau, De Gregorio, Reinhart, & Wickham (1995) have used deterministic trend and stochastic trend as a random process as a proxy for financial innovation. While some studies (Cesarano, 1990;Chowdhury, 1989;Hafer & Hein, 1984;Hasan, 2009;Stracca, 2003) intend to test the Gurley & Shaw (1960) hypothesis, henceforth Gurley-Shaw hypothesis, that financial innovation increases the interest elasticity of money demand.…”

Section: Introductionmentioning

confidence: 99%

“…The influence of this financial innovation effect, in a simplest way, may be captured by including a linear time trend in the regression. Arestis et al (1992), Arrau and De Gregorio (1993) and Arrau et al (1995) have used deterministic trend and stochastic trend as a random process as a proxy for financial innovation. While some studies (Cesarano, 1990; Chowdhury, 1989; Hafer and Hein, 1984; Hasan, 2009; Stracca, 2003) intend to test the Gurley and Shaw (1960) hypothesis, henceforth the Gurley–Shaw hypothesis, that financial innovation increases the interest elasticity of money demand.…”

Section: Introductionmentioning

confidence: 99%

Currency demand stability in the presence of seasonality and endogenous financial innovation

Singh

2017

JFEP

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Based on the money-in-the-utility function, this paper intends to examine the stability of the currency demand function for India with real private consumption expenditure, tax-GDP ratio and deposit rate as explanatory variables by applying the seasonal cointegration technique developed by EGHL (1993) and HEGY (1990) for the period 1996:1 to 2014:4. The empirical findings show that there is absence of long-run cointegrationg relationship among the variables at the zero and annual frequency, however, there is evidence of a relationship among the variables at the biannual frequency. Moreover, the time-varying coefficient of deposit rate elasticity, used to test the Gurley-Shaw hypothesis, suggests that innovations in financial markets, especially improvements in the payment technology, raises the deposit rate elasticity, beginning from 2010 onward.

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The impact of financial innovations on the demand for money in the UK and Canada

Cited by 10 publications

References 26 publications

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

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

Financial Development and the Effectiveness of Monetary Policy: New Evidence from Malaysia

Currency demand stability in the presence of seasonality and endogenous financial innovation

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