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Demand and Currency Substitution: New Evidence from the Iranian Economy

Marzieh Bolhassani (), Hassan Mohammadi () and James Payne ()
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Marzieh Bolhassani: University of Wisconsin-Milwaukee, Department of Economics, Postal: Bolton Hall Room 813, Milwaukee, WI 53211 USA,

Economia Internazionale / International Economics, 2003, vol. 56, issue 4, 423-433

Abstract: The ARDL bounds testing procedure advanced by Pesaran, et al. (2001) is used to estimate a quarterly model of the long-run money demand for postrevolution Iran, and test for its stability. Using quarterly data from 1980:2 to 2003:1, we find support for the existence of stable money demand functions for both m1 and m2 real balances. In addition, three factors-real income, inflation, and the black market foreign exchange rate exert statistically significant and meaningful effects on real balances. In particular, we find evidence in favor of currency substitution for m1 real balances.

JEL-codes: E41 F31 (search for similar items in EconPapers)
Date: 2003
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