Money Demand Function: A heterogeneous Panel Application

Nasri Harb ()

Economics Working Papers from Department of Economics, College of Business and Economics, UAE University

Abstract: We construct an aggregate data panel for the GCC's six countries and verify the cointegration hypothesis among the variables of the money demand function using Pedroni's heterogeneous panel cointegration tests (2001). Then, we estimate the idiosyncratic, panel and group-mean cointegrating vectors using FMOLS and a modified version of FMOLS developed by Pedroni (2000). We find strong evidence of cointegration amongst our variables. The estimated elasticities have the expected signs in general but are significant only in the case of the scale variable. Unlike previous studies, we find a significant negative the semi elasticity of money demand with respect to interest rate when we allow for heterogeneity amongst our panel's members.

Keywords: Demand; Time series; Panel Cointegration; FMOLS (search for similar items in EconPapers)
JEL-codes: C22 C23 E41 F41 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2003-10
New Economics Papers: this item is included in nep-cwa, nep-mac and nep-mon
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Journal Article: Money demand function: a heterogeneous panel application (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:aeu:econom:03/04-01

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