On the stability of money demand: evidence from Madagascar

Radoniaina Randrianarisoa

MPRA Paper from University Library of Munich, Germany

Abstract: This paper seeks to determine the existence of a stable demand for money relation for the case of Madagascar. We use an Engle-Granger error correction model to be able to demonstrate that in the long-run, the demand for money is negatively explained by the opportunity cost and positively by real income and the proxy for financial innovation. The latter, when taken into account, produces a less stable demand than when real income and opportunity cost are only used. Hence, the real demand for money in Madagascar is considered as stable, but fragile. This situation justified the migration to a more forward-looking monetary policy regime.

Keywords: money demand; financial innovation; cointegration; vector error-correction model (search for similar items in EconPapers)
JEL-codes: E41 (search for similar items in EconPapers)
Date: 2024-06-10
New Economics Papers: this item is included in nep-afr, nep-ban and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:121170

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