Investigating the Stability of Money Demand in Ghana

Dennis Nchor and Václav Adamec
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Václav Adamec: Department of Statistics and Operations Analysis, Faculty of Business and Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic

Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 2016, vol. 64, issue 6, 2075-2079

Abstract: The study examined the demand for broad money and its stability in Ghana. Johansen's cointegration approach reveals that the variables were non stationary and cointegrated, therefore, an error correction model, ECM was used to determine the factors that influence real money aggregate in Ghana from 1990 to 2014. The study estimated the results using two set of variables for real demand for money: M1 and M2+. This was done given the assumption that the demand for money was equal to the supply of money. The results show that, GDP affects the level of demand for money in the long run while the interest rate affects it in the short run. The error correction term in each of the cases shows that, 18 % of deviations in the real demand for money is corrected annually. The CUSUM tests of parameter stability showed that, the money demand function was stable over the period and the Chow test indicated that there were no structural breaks.

Keywords: money demand; cointegration; error correction model; stability; money supply (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:mup:actaun:actaun_2016064062075

DOI: 10.11118/actaun201664062075

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