What Determines the Demand for Money in the Asian-Pacific Countries? An Empirical Panel Investigation

Abbas Valadkhani ()
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Abbas Valadkhani: University of Wollongong, http://www.uow.edu.au/commerce/econ/who/index.html

Economics Working Papers from School of Economics, University of Wollongong, NSW, Australia

Abstract: This paper examines the long- and short-run determinants of the demand for money in six countries in the Asian-Pacific region using panel data (1975-2002). Various country-specific coefficients are allowed to capture inter-country heterogeneities. Consistent with theoretical postulates, it is found that (a) the demand for money in the long-run positively responds to real income and inversely to the interest rate spread, inflation, the real effective exchange rate, and the US real interest rate; (b) the long-run income elasticity is greater than unity; and (c) both the currency substitution and capital mobility hypotheses hold only in the long run.

Keywords: Demand for Money; Money and Interest Rate Spread; Panel Data (search for similar items in EconPapers)
JEL-codes: E41 E52 C33 O11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-sea
Date: 2006
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