Money Demand in Australia: Which Monetary Aggregate Matters?

Sokchea Lim and Channary Khun

Economic Papers, 2014, vol. 33, issue 1, 95-103

Abstract: type="main" xml:id="ecpa12062-abs-0001">

We examine the long-run relation linking the demand for money in Australia to economic activity and the interest rate for an extended period from 1976 to 2010. Using the Johansen cointegration test, we test the relationship for three measures of monetary aggregate – currency, M1 and M3. The results provide evidence for a long-run equilibrium relation linking the demand for M1 to economic activity and the interest rate. The relationship is stable with unitary income elasticity and sizeable interest rate semi-elasticity. The evidence may open a new debate for the Reserve Bank of Australia to look into the use of M1 as a tool in implementing its monetary policy after a long-time abandonment of M3.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1111/ecpa.2014.33.issue-1 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:econpa:v:33:y:2014:i:1:p:95-103

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0812-0439

Access Statistics for this article

Economic Papers is currently edited by Professor Guay Lim

More articles in Economic Papers from The Economic Society of Australia Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().