Money demand in an open-economy shopping-time model: an out-of-sample-prediction application to Canada

Hueng, C. James

doi:10.1016/s0148-6195(99)00019-3

Cited by 11 publications

(8 citation statements)

References 26 publications

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“…In this framework, the opportunity cost of holding wealth as domestic money includes the domestic interest rate, foreign interest on bonds, and the gains or losses from exchange rate movements. We follow Hueng () and assume that domestic and foreign goods are purchased using domestic and foreign currencies, respectively and that the household saves these currencies in a financial institution. Thus, consumption baskets for both domestic and foreign goods depend on the number of withdrawals of both currencies from financial institutions and the real money balances withdrawn, respectively.…”

Section: Theoretical Specificationmentioning

confidence: 99%

“…Hueng () further assumes that the number of withdrawals from the financial institution depends on the sophistication of technologies in the financial system (financial innovations) and that in the process of withdrawing the currencies, the household foregoes its leisure time and gains utility through consumption using the withdrawn real money balances.

T h e r e f o r e, l e i s u r e f o r e g o n e true(1 - L_{t} true) = f true(W_{t} true) + f true(W_{t}^{f} true)

where

W_{t} = θ_{t} \frac{P_{t} C_{t}}{M_{t}}

and

W_{t}^{f} = θ_{t} \frac{P_{t}^{f} C_{t}^{f}}{M_{t}^{f}}

and θ t is the level of financial innovations.…”

Section: Theoretical Specificationmentioning

confidence: 99%

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Financial Innovations and Money Velocity in Uganda

Nampewo¹,

Opolot²

2016

African Development Review

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This paper investigates the impact of financial innovations on the stability of money velocity. The paper contributes to the existing literature in three ways; first, we develop a simple analytical framework for money velocity taking into account the effect of financial innovations. Second, we test the model on Ugandan time series data using the ARDL bounds testing approach. Third, we check for the stability of the long-run money velocity function. Results show significant negative and positive effects of financial innovations on the money velocity in the short and long run, respectively. In addition, the long-run money velocity equation is stable despite the financial innovations that have evolved over time. Furthermore, other macroeconomic determinants of money velocity, including real income, the 91-day treasury bill rates, inflation expectations and the exchange rate exhibited a significant and positive long-run relationship with money velocity except for real income. These results suggest that financial innovations have not altered the long-run stability of money velocity in Uganda. Thus, given the importance of financial innovations in enhancing the access to financial services, we recommend that more technological advances and diversification of financial products should be enhanced so as to improve financial sector development and overall economic growth.

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Section: Theoretical Specificationmentioning

confidence: 99%

T h e r e f o r e, l e i s u r e f o r e g o n e true(1 - L_{t} true) = f true(W_{t} true) + f true(W_{t}^{f} true)

where

W_{t} = θ_{t} \frac{P_{t} C_{t}}{M_{t}}

and

W_{t}^{f} = θ_{t} \frac{P_{t}^{f} C_{t}^{f}}{M_{t}^{f}}

and θ t is the level of financial innovations.…”

Section: Theoretical Specificationmentioning

confidence: 99%

Financial Innovations and Money Velocity in Uganda

Nampewo¹,

Opolot²

2016

African Development Review

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“…The real government expenditure on goods and services (g) is assumed to be a "good". In the specification of the utility function (1), for the sake of simplicity, following Cox (1983), Drazen and Helpman (1990), Hueng (1999) and Kia (2006a) among many others, we assume that the total output is exogenously given. In other words, we assume labor is supplied inelastically.…”

Section: The Modelmentioning

confidence: 99%

“…Following Sidrauski (1967), it is assumed services of money enter the utility function. Furthermore, following Stockman (1980), Lucas (1982, Guidotti (1993), Hueng (1999) and Kia (2006a), it is assumed that purchases of domestic and foreign goods are made with domestic and foreign currencies, respectively, and, therefore, the services of both domestic and foreign currencies enter the utility function. Let us choose the units in such a way that the services of domestic money S is equal to m and the services of foreign money S* is equal to m*.…”

Section: The Modelmentioning

confidence: 99%

Determinants of the real exchange rate in a small open economy: Evidence from Canada

Kia

2013

Journal of International Financial Markets, Institutions and Mo

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“…Assume the flow of services derived from the holding of real cash balances is a function of both domestic and foreign stocks of real cash balances. Assume also that the $US represents the foreign currency and that, following Stockman (1980), Lucas (1982, Guidotti (1993) and Hueng (1999), purchases of domestic and foreign goods are made with domestic and foreign currencies, respectively. 2 Specifically,…”

Section: Model Specificationmentioning

confidence: 99%