The money demand function in a small, open and quasi-monetary economy: the Gambia

Masoud Moghaddam and Momodou Bah

Applied Economics, 2008, vol. 40, issue 6, 731-734

Abstract: The open-economy money demand asserts that for its underlying theory to hold, the variables ought to be co-integrated. Co-integrated variables although nonstationary in level, can share a long-term trend that is indeed stationary. However, the open money demand model has mainly been tested in developed and developing nations. This article investigates the co-integrated open-economy money demand in the Gambia where the macro economy is a quasi-monetary system, small (relative to the world market), but very open with a floating exchange rate regime. In the co-integrated space, the Gambian money demand appears to be quite responsive to domestic income, a measure of interest rate and the real exchange rate fluctuations.

Date: 2008
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DOI: 10.1080/00036840600749649

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