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How stable is the demand for money in African countries?

Mohsen Bahmani-Oskooee () and Abera Gelan

Journal of Economic Studies, 2009, vol. 36, issue 3, 216-235

Abstract: Purpose - Studies that have addressed the stability of the demand for money in African countries are rare. A few papers have addressed the issue in a small number of individual countries. For cross-country comparison, this paper aims to investigate the stability of the M2 demand for money in 21 African countries using quarterly data over the period 1971Q1-2004Q3. Design/methodology/approach - A standard money demand function is designed. It is estimated using a bounds testing approach to co-integration and error-correction modeling. Findings - Application of the CUSUM and CUSUMSQ tests to the residuals of error-correction models reveals that in almost all 21 countries, M2 demand for money is stable. This could be due to incorporating the short-run adjustment process in testing for the stability of the long-run elasticity estimates. Research limitations/implications - Due to data limitations, the study could not be extended to all countries in Africa. Originality/value - This is the most comprehensive study in the literature for Africa.

Keywords: Money; Demand; Africa (search for similar items in EconPapers)
Date: 2009
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