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Long-Run Money Demand in Latin-American countries: A Nonestationary Panel Data Approach

Cesar Carrera ()

No 2012-016, Working Papers from Banco Central de Reserva del Perú

Abstract: Central banks have long been interested in obtaining precise estimations of money demand given the fact that the evolution of money demand plays a key role over several monetary variables. I use Pedroni's (2002) Fully Modified Ordinary Least Square (FMOLS) to estimate the coefficients of the long-run money demand function for 15 Latin-American countries. The FMOLS technique pool information regarding common long-run relationships while allowing the associated short-run dynamics and fixed effects to be heterogeneous across different members of the panel. For this group of countries, I find evidence of a cointegrating money demand, an income elasticity of 0.94, and an interest-rate semi-elasticity of -0.01.

Keywords: Money demand; panel cointegration; FMOLS; Latin-American (search for similar items in EconPapers)
JEL-codes: C22 C23 E41 (search for similar items in EconPapers)
Date: 2012-08
New Economics Papers: this item is included in nep-lam and nep-mon
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Journal Article: Long-run Money Demand in Latin American Countries: A Nonstationary Panel Data Approach (2016) Downloads
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