An Investigation into the Interest Elasticity of Demand for Money in Developing Countries: A Panel Data Approach

Felix S. Nyumuah

International Journal of Economics and Finance, 2017, vol. 9, issue 3, 69-80

Abstract: The issue as to whether the interest rate influences the demand for money in developing countries is still controversial. The aim of this study is to attempt to resolve this controversy. The study uses panel data from eight African countries to look at the interest elasticity of demand for money in developing countries. The countries used in the study are Angola (ANG), Equatorial Guinea (EQG), Gambia (GMB), Guinea-Bissau (GBS), Kenya (KNY), Mali (MLI), Nigeria (NGR) and Uganda (UGD). Overall, the study finds the interest rate to be inelastic in the short run but elastic in the long run. This finding suggests that monetary policy is ineffective in developing countries in the long run.

Keywords: demand for money; interest rates effects; monetary policy; panel data models (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijefaa:v:9:y:2017:i:3:p:69-80

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