Real Money Demand, Income, and Interest Rates in Senegal: Is there a Long-Run Stable Relation?

Marcelin Diagne ()

International Advances in Economic Research, 2010, vol. 16, issue 2, 213-222

Abstract: In this paper, I examine the stability of the long-run relationship between real money demand, income, and interest rates in Senegal. Using advances in unit root and co-integration, I test for co-integration between M1 velocity, output, and the interest rate. By virtue of the fixed exchange rate regime, I used both the three months French Treasury bill and the deposit rate to proxy the opportunity cost of holding money. I used Stock and Watson ( 1993 ) DOLS in addition to an ECM. Quarterly data ranging from 1970:Q4 to 2006:Q4 is used in the analysis, and the results reveal evidence of co-integration between real money demand, income, and the interest rate. For this study, I used both an ECM co-integration test and Johansen (Journal of Economic Dynamics and Control 12(2/3), 231-254, 1988 ) co-integration method. Copyright International Atlantic Economic Society 2010

Keywords: Co-integration; Unit root; Real money balances; Monetary; Senegal; E4; F3; F31; F41; C10 (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1007/s11294-010-9259-y

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