Modelling the Demand for Money in Sub-Saharan Africa (SSA)

Afees Salisu, Idris Ademuyiwa () and Basiru Fatai ()
Additional contact information
Idris Ademuyiwa: Department of Economics, University of Ibadan
Basiru Fatai: Department of Economics, University of Ibadan

Economics Bulletin, 2013, vol. 33, issue 1, 635-647

Abstract: In this paper, we extend the work of Hamori (2008) to include three main innovations: (i) we consider an open economy version of money demand which is more representative for small open economies like those in SSA; (ii) we consider both the homogenous and heterogeneous panel cointegration methods to estimate the money demand function in SSA; and (iii) we consider specific analyses for the prominent sub-regions in SSA namely, East Africa, South Africa, Central Africa and West Africa in order to further validate the choice of heterogeneous panel cointegration for modelling money demand in SSA. We find a cointegrating relationship among money demand, income, price level, exchange rate and interest rate in SSA and thus, the consideration of an open economy version is fundamental when modelling money demand in SSA. The specific regressions for the sub-regional units in SSA indicate the existence of heterogeneity in regression estimates. Thus, the consideration of heterogeneous panel cointegration method is valid and ignoring this heterogeneity feature when modelling money demand for SSA countries may yield biased and inconsistent results.

Keywords: Money demand; Panel Cointegration; Panel ECM; SSA (search for similar items in EconPapers)
JEL-codes: C5 E5 (search for similar items in EconPapers)
Date: 2013-03-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2013/Volume33/EB-13-V33-I1-P60.pdf (application/pdf)

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:ebl:ecbull:eb-12-00498

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().