Long- and short-run determinants of the demand for money in New Zealand: A cointegration analysis

Abbas Valadkhani

New Zealand Economic Papers, 2002, vol. 36, issue 2, 235-250

Abstract: The existence of a stable demand for money is very important for the conduct of monetary policy even in this new era of inflation targeting. This paper examines the long-run determinants of the demand for M3 in New Zealand employing the Johansen cointegration technique and quarterly data for the period 1988: 1-2002: 2- The paper finds, inter alia, that the demand for money is cointegrated with real income, the spread between interest on money and on non-money assets, the expected rate of inflation, and the real effective, (trade weighted index) exchange rate.

Date: 2002
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DOI: 10.1080/00779950209544373

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