Determinants of reserve money demand: a multivariate co-integrating approach

Levent Korap ()

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, a reserve money demand model is constructed for the Turkish economy. Base on the contemporaneous multivariate co-integration estimation methodology, our findings indicate that the main alternative costs to hold reserve money balances in hand are the expected exchange rate depreciation representing ongoing currency substitution phenomenon in the economy and the equity prices. The semi-elasticity of domestic inflation reveals high degree of substitutability between real monetary balances and durable commodities. Furthermore, there exists evidence in favor of the effects of financial development on the money demand function in the sense that diversification of financial tools held in hand against demand for money balances is a necessary condition for the determination of long-run course of the monetary policy.

Keywords: Reserve Money Demand; Co-integration; Turkish economy (search for similar items in EconPapers)
JEL-codes: C32 E41 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Pamukkale Üniversitesi Sosyal Bilimler Enstitüsü Dergisi 2.1(2008): pp. 33-42

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/25525/1/MPRA_paper_25525.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:25525

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().