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How Stable is the Money Demand Function in Turkey?

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  • Anýl Akçaðlayan
  • Ferda Dönmez Atbaþý

Abstract

The paper attempts to test the stability of money demand relations for four money aggregates in Turkey. The paper uses the Johansen multivariate cointegration analysis over the data covering the period, 1990:01-2005:12. The findings indicate that there is a stationary long-run relationship between the different monetary aggregates, real income, domestic interest rates, foreign interest rates, and the real effective exchange rate. However, CUSUM and CUSUMQ stability tests showed that M1 and M2Y money demand functions are stable while M2 and M3 money demand functions are not stable over the period under consideration. The results show that the level of real income, domestic interest rate and real effective exchange rate play a significant role in determining the money demand.

Suggested Citation

  • Anýl Akçaðlayan & Ferda Dönmez Atbaþý, 2008. "How Stable is the Money Demand Function in Turkey?," The IUP Journal of Applied Economics, IUP Publications, vol. 0(2), pages 7-18, March.
    • Handle: RePEc:icf:icfjae:v:07:y:2008:i:2:p:7-18
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    Cited by:

    1. Emel Siklar & Ilyas Siklar, 2021. "Is There a Change in the Money Demand Stability in Turkey? A Nonlinear Approach," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 7(2), pages 28-42, 06-2021.

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