Error-Correction Based Panel Estimates of the Demand for Money of Selected Asian Countries with the Extreme Bounds Analysis

B. Rao and Saten Kumar

MPRA Paper from University Library of Munich, Germany

Abstract: This paper uses the extreme bounds analysis (EBA) of Leamer (1983 &1985) to analyze the robust determinants of the demand for money in a panel of 17 Asian countries for the period 1970 to 2009. These robust determinants are found to be unit root variables. Therefore, cointegration between these variables is tested with a recent time series panel method developed by Westerlund (2007). This method uses the error-correction formulation and has more power against the null of no cointegration. The results show that there is a well-defined long-run demand for money. Using the lagged error correction term from the estimated cointegrating equation, the short-run dynamic relationships are estimated. This paper, thus, suggests some useful guidelines to estimate other relationships with panel data.

Keywords: Demand for money; Extreme bounds analysis; Panel ECM; Structural breaks (search for similar items in EconPapers)
JEL-codes: C33 E41 (search for similar items in EconPapers)
Date: 2010-12-06
New Economics Papers: this item is included in nep-ets and nep-mon
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Error-correction based panel estimates of the demand for money of selected Asian countries with the extreme bounds analysis (2012)
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