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Money demand and black market exchange rate: a cointegration approach with structural break

Mouyad Al Samara, Lanouar Charfeddine () and Zouhair Mrabet
Authors registered in the RePEc Author Service: Mouyad Alsamara ()

Afro-Asian Journal of Finance and Accounting, 2017, vol. 7, issue 2, 177-199

Abstract: This paper examines different specifications of the money demand function by including both black market exchange rate and oil prices as additional variables in Syria for the period 1990Q1-2009Q4. In order to test the stability of the proposed money demand function specifications, we apply the cointegration approach with structural breaks. The empirical results provide strong evidence for the existence of a stable long run relationship with shift in the cointegration vector. In particular, we found that 28% of the money demand adjustment, following a short-run shock, occurs in the following period. Moreover, the results show that the two additional variables, black market exchange rate and the oil price, play a vital role in determining the money demand in Syria.

Keywords: money demand; cointegration test with structural break; black market exchange rate. (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:ids:afasfa:v:7:y:2017:i:2:p:177-199