How Stable is the Money Demand in Taiwan?

Chen-Huan Shieh, Shou-Hsiang Liu and Chung-Ching Lee
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Chen-Huan Shieh: Department of Accounting, Ming Chuan University, Taiwan
Shou-Hsiang Liu: Department of Risk Management and Insurance, Ming Chuan University, Taiwan
Chung-Ching Lee: Department of Accounting, Ming Chuan University, Taiwan

International Journal of Economics and Financial Research, 2017, vol. 3, issue 5, 54-64

Abstract: Empirical literature on money demand is mainly based on the estimation of a long run relation by means of time-invariant cointergration approach. Taiwan has experienced the economic and financial regime change since 1979. The purpose of this paper is to test structural breaks in Taiwan long run money demand equation. We examine six of the most influential specifications proposed in the literature. The classical set of explanatory variables (e.g. income and interest rates) is extended on the base of a number underlying economic reasons related to financial, labor and international portfolio characteristics. The results suggest that international financial market variables and the classical specifications are the key determinants of structural instability observed in Taiwan broad money.

Keywords: Stability; Regime shift; Cointegration. (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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