Money demand function: a heterogeneous panel application

Abstract

An aggregate data panel is constructed for the GCC's six countries and the cointegration hypothesis among the variables of the money demand function is verified using Pedroni's heterogeneous panel cointegration tests. The idiosyncratic, panel and group-mean cointegrating vectors are then estimated using FMOLS and a modified version of FMOLS developed by Pedroni. The idiosyncratic elasticities have the expected signs in general but are significant only in the case of the scale variable. However, when the power of the test is increased, and allowance made for heterogeneous cointegrating vectors, the group-mean estimator shows a significant negative semi-elasticity of money demand with respect to interest rate.

Mixed signals among tests for panel cointegration

“…The results reported in Table 3 suggest that in a majority of cases, V g and V p result in a rejection of the no cointegration null, which is consistent with the results obtained in these studies. On the other hand, for the Bahmani-Oskooee, Miteza and Nasir (2002), Harb (2004) and Jenkins and Snaith (2005) data sets, we see that the null hypothesis is usually not rejected, which do not agree with the results provided in these studies.…”

Demand for money in the selected OECD countries: a time series panel data approach and structural breaks

“…Although many recent empirical studies on the demand for money have used country specific data and time series methods, a number of studies have also used panel data and panel estimation methods; Mark and Sul (2003), Valadkhani and Alauddin (2003), Harb (2004), Garcia-Hiernaux and Cerno (2006), Lee and Chang (2006), Fidrmuc (2009), Dreger et al (2007, Elbadawi andSchmidt-Hebbel (2007), Carrera (2008), Valadkhani (2008), Hamori and Hamori (2008), Hamori (2008), Rao and Kumar (2009b), Rao et al (2009) and Setzer and Wolff (2009 Dreger et al (2007) is high exceeding 1.7. We shall treat these two studies as exceptional to the findings of the majority of the panel data studies.…”

An Investigation into the Interest Elasticity of Demand for Money in Developing Countries: A Panel Data Approach

“…The literature which examines the demand for money in developing countries, using panel data techniques and incorporating modern time series methods (e.g., Harb, 2004;Carrera, 2008;Hamori, 2008;Valadkhani, 2008;Rao & Kumar, 2009), influences the conduct of this study. All the studies except Hamori (2008) were conducted for Asian countries.…”