An Annual Money Demand Function for Pakistan: Some Further
      Results

Mangla, Inayat Ullah

doi:10.30541/v18i1pp.21-33

Cited by 17 publications

(9 citation statements)

References 21 publications

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“…The demand for money in Pakistan has been the subject of extensive study. 2 There is little empirical difference whether measured or permanent income is used as the scale variable [Mangla (1979)]. While some researchers have argued that inflation is the appropriate opportunity cost of money, 3 others argue that the return on deposits and the inter-bank call money rate did have a significant impact on money holding in Pakistan.…”

Section: Survey Of Empirical Studies On the Demand For Money In Pakistanmentioning

confidence: 99%

The Demand for Simple-sum and Divisia Monetary Aggregates for Pakistan: A Cointegration Approach

Tariq¹,

Matthews²

2022

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Financial liberalisation and the advance of financial innovation in a number of developed economies has been blamed for the break-down in the demand for money based on simple sum measures. This break-down has prompted research into Divisia measures of the demand for money. Like many developing countries, Pakistan is going through a period of financial deregulation which goes hand in hand with financial innovation due to increased competition in the banking industry. This paper employs the methodology of cointegration to compare simple-sum and Divisia level estimates of the demand for money for Pakistan for the period 1974Q4 to 1992Q4. Simple sum measures of M1 and M2 were compared with Divisia versions. The paper reports little evidence in support of the superiority of the Divisia monetary aggregates. Both types of measure produce a stable demand for money and perform satisfactorily in post-sample stability tests, although the Divisia measure appears to perform marginally better on conventional statistical criteria. However, our conclusions have to be qualified by the limitations of the data and the knowledge that the period of financial innovation and deregulation has been relatively recent. The policy significance of the results suggests that currently there is no advantage from switching from simple-sum to Divisia aggregates at the existing level of official aggregation as the proper indicator of monetary policy. However, if financial deregulation and innovation continues at the current pace, the Divisia aggregates may in future prove to be the better indicator.

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Section: Survey Of Empirical Studies On the Demand For Money In Pakistanmentioning

confidence: 99%

The Demand for Simple-sum and Divisia Monetary Aggregates for Pakistan: A Cointegration Approach

Tariq¹,

Matthews²

2022

pdr

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“…In Pakistan, like other countries, considerable effort has been made in estimating money demand functions. For example, Akhtar (1974), Abe, et al (1975), Mangla (1979), Khan (1980Khan ( , 1982Khan ( , 1982a, Nisar and Aslam (1983), Ahmed and Khan (1990), Hossain (1994), Khan and Ali (1997), Qayyum (1998Qayyum ( , 2001, etc., have estimated money demand functions by using alternative specifications. Some of these studies such as Ahmed and Khan (1990) and Qayyum (2001) have also examined the stability of their estimated money demand functions.…”

Section: Introductionmentioning

confidence: 99%

Modelling the Demand for Money in Pakistan

Qayyum¹

2022

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The study estimates the dynamic demand for money (M2) function in Pakistan by employing cointegration analysis and error correction mechanism. The parameters of preferred model are found to be super-exogenous for the relevant class of interventions. It is found that the rate of inflation is an important determinant of money demand in Pakistan. The analysis reveals that the rates of interest, market rate, and bond yield are important for the long-run money demand behaviour. Since the preferred model is superexogenous, it can be used for policy analysis in Pakistan.

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“…However, the studies carried out by Rao and Chaudhry [17], Akhtar [2], Abe et ai. [1], Mangla [12] and Khan [8] conclude that interest rate variable does play an important role in the analysis of money demand in Pakistan.…”

Section: Introductionmentioning

confidence: 99%

“…In the conventional estimation of money demand, rt and rc are entered separately in the money demand functions. Table 1 presents the results of the present study and those of Mangla [12] and Khan [8] in which r is used as the opportunity cost varic able. The estimated coefficients, with both M1 and M2 definitions of money, turn out to be significant with expected signs.…”

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confidence: 99%

The Demand for Money and the Term Structure of Interest Rates in Pakistan

Nisar¹

1983

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Using the term structure of interest rates, and treating measured income as a scale variable, the paper analyses the demand for money in Pakistan. It is found that replacement of simple average interest rate by the term structure of time deposit rates improves the estimates of money demand function. Money demand is found to be sensitive to changes in interest rates and income level. Furthermore, diseconomies of scale are observed in money holdings.

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An Annual Money Demand Function for Pakistan: Some Further Results

Cited by 17 publications

References 21 publications

The Demand for Simple-sum and Divisia Monetary Aggregates for Pakistan: A Cointegration Approach

The Demand for Simple-sum and Divisia Monetary Aggregates for Pakistan: A Cointegration Approach

Modelling the Demand for Money in Pakistan

The Demand for Money and the Term Structure of Interest Rates in Pakistan

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