Economic uncertainty and money demand stability in the CEECs

Valentina-Ioana Mera, Camelia Romocea Turcu and Monica Ioana Pop Silaghi
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Valentina-Ioana Mera: BabeÅŸ-Bolyai University of Cluj-Napoca
Monica Ioana Pop Silaghi: BabeÅŸ-Bolyai University of Cluj-Napoca
Authors registered in the RePEc Author Service: Monica Ioana Pop-Silaghi ()

No 2018.08, Working Papers from International Network for Economic Research - INFER

Abstract: This paper aims at building a money demand function that takes account of the heterogeneities of the Central and Eastern European Countries (CEECs) in the context of European integration. We extend the traditional specification of money demand to capture the role of economic uncertainty, using the European sentiment indicator. The traditional determinants of the demand for money (real GDP, interest rate, inflation rate) are found to be significant and have the expected sign. Above this, we also find that the role of economic sentiments impact significantly the money demand: a rise of the perceived uncertainty leads to an increase in money demand due to precautionary reasons. Our results also suggest that a currency substitution effect against both euro and USD is present in the CEECs.

Keywords: money demand; economic sentiments; CEE countries; Dynamic OLS (search for similar items in EconPapers)
JEL-codes: E (search for similar items in EconPapers)
Pages: 29 pages
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:inf:wpaper:2018.08

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