Estimation of climate change augmented precautionary motive demand for money under extreme values

Muhammad Kumail (), Mubbasher Munir () and Noman Arshed ()
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Muhammad Kumail: University of Management and Technology
Mubbasher Munir: Sunway University
Noman Arshed: Sunway University

SN Business & Economics, 2025, vol. 5, issue 10, 1-30

Abstract: Abstract Background The stability of the money demand function is crucial in formulating an effective monetary policy, with monetary aggregates playing a vital role in fulfilling monetary goals for countries. Objectives This study conducted empirical research to find a stable money demand function. The study’s novelty comes from adding precautionary motive determinants in the money demand function. Methods Data of 85 nations is used. Parameters from all three motives of demand for money are used in this study. Gross National Income and Consumer Price Index are used for transactionary motive, Interest rate and Exchange rate are used for the speculative motive and precautionary motive, Political Stability and Health Vulnerability from Climate Change were utilized. The research applies the Panel Quantile Autoregressive Distributed Lag model. Findings Empirical findings suggest that all the determinants are significant in the long run, with all the parameters showing a significant positive relationship with money demand, except interest rate. Implications This new function could help in optimizing the monetary policy to change money demand.

Keywords: Monetary policy efficiency; Stable money demand; Quantile ARDL (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s43546-025-00909-5

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