INTEREST RATE AND THE MONEY DEMAND FUNCTION IN DEVELOPING COUNTRIES: The Case of Saudi Arabia

Ahmad M. A. Ghamdi

Pakistan Journal of Applied Economics, 1989, vol. 8, issue 2, 167-177

Abstract: Due to lack well-developed financial market and the Islamic prohibition of a predetermined interest rate,one can expect the opportunity cost of holding money in Saudi Arabia and some developing countries to be captured mainly by the inflation rate and some measures of external monetary and financial factors. The demand for money function developed here takes into consideration the effect of such factors. The empirical results of the estimated money equation for Saudi Arabia suggest that an increase in real income tends to increase the demand for money but, high inflation rates tend to lower it. The empirical evidence also indicated that foreign interest rates and exchange rate variation have a effect in the Saudi money demand function.

Date: 1989
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://aerc.edu.pk/wp-content/uploads/2017/03/4th-Paper-Page-167-177-1.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pje:journl:article1989wini

Access Statistics for this article

More articles in Pakistan Journal of Applied Economics from Applied Economics Research Centre Contact information at EDIRC.
Bibliographic data for series maintained by Samina Khalil ( this e-mail address is bad, please contact ).