THE INCOME AND INTEREST ELASTICITIES OF DEMAND FOR MONEY IN BANGLADESH: 1973-2003

Akhand Hossain ()

The IUP Journal of Monetary Economics, 2006, vol. IV, issue 2, 73-96

Abstract: In this paper, a partial adjustment model of money demand for Bangladesh is specified and is estimated with the annual data for the period 1973-2003. Then, the recursive and rolling regression techniques are applied and the possibility of changes in the income and interest elasticities of demand for money since the early 1980s are estimated, when financial deregulation and financial reforms had been started. The empirical results suggest that, despite financial reforms, the money demand function (narrow or broad) in Bangladesh, has remained broadly stable since the mid-1980s. However, the empirical results obtained by the recursive and rolling regression techniques reveal that the income and interest (or foreign financial asset return) elasticities of demand for money, have somewhat changed since the early 1990s, which also has monetary policy implications.

Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjmo:v:04:y:2006:i:2:p:73-96

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