The Money Demand Behaviour in Bangladesh, 1973-2003: An Application of the Cointegration and Error-Correction MethodsAkhtar Hossain
Indian Economic Review, 2006, vol. 41, issue 1, pages 55-80 Abstract: By applying the methods of cointegration and error-correction, this paper investigates the money demand behaviour in Bangladesh with annual data for the period 1973 to 2003. The empirical results suggest that real money balances (narrow or broad), real permanent income and the deposit rate of interest formed a cointegral relationship for the sample period of study. The dynamic money demand behaviour has been investigated by estimating an error-correction model within a general-to-specific modelling framework. The preferred error-correction model has been found stable. Having identified a stable money demand function, the paper has examined whether there was any structural break in the long-run money demand function during the sample period of study. For this purpose, the Quandt Likelihood Ratio test has been conducted for the period 1982 to 1993 when most financial deregulation and reform measures were undertaken. The test results suggest that there was a structural break in the narrow money demand relationship in 1987 and that there was a structural break in the broad money demand relationship in 1983. Keywords: Money demand; Cointegration; Stability; Financial reforms (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Ordering information: This journal article can be ordered from Access Statistics for this article Indian Economic Review is edited by Partha Sen and Pami Dua More articles in Indian Economic Review from Department of Economics, Delhi School of Economics |
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