The demand for money in korea: Evidence from the cointegration test

Jae-Kwang Hwang ()

International Advances in Economic Research, 2002, vol. 8, issue 3, 188-195

Abstract: This paper shows that there exists a long-run equilibrium relationship between M2 and its determinants, real income and the long-term interest rate, in Korea by using Johansen and Juselius maximum likelihood cointegration method. However, M1 does not have any meaningful cointegration relationships with its determinants. The long-term interest rate is a better proxy than the short-term rate to measure the opportunity cost of holding money. Based on the results, a broad definition of money is a better measure than a narrow definition of money in considering the long-run economic impacts of changes in monetary policy in Korea. Copyright International Atlantic Economic Society 2002

Date: 2002
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DOI: 10.1007/BF02297956

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