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Demand for Money in Hungary: An ARDL Approach

Author

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  • Nikolaos Dritsakis

    (University of Macedonia Economics and Social Sciences, GREECE)

Abstract

This study examines the demand for money in Hungary using the autoregressive distributed lag (ARDL) cointegration framework. The results based on the bounds testing procedure confirm that a stable, long-run relationship exists between demand for money and its determinants: real income, inflation rate and nominal exchange rate. The empirical results show that there is a unique cointegrated and stable long-run relationship among M1 real monetary aggregate, real income, inflation rate and nominal exchange rate. We find that the real income elasticity coefficient is positive while the inflation rate elasticity and nominal exchange rate are negative. This indicates that depreciation of domestic currency decreases the demand for money. Our results also reveal that after incorporating the CUSUM and CUSUMSQ tests, M1 money demand function is stable between 1995:1 and 2010:1.

Suggested Citation

  • Nikolaos Dritsakis, 2011. "Demand for Money in Hungary: An ARDL Approach," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 01-16, November.
    • Handle: RePEc:bap:journl:110501
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    References listed on IDEAS

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    11. Birendra Bahadur Budha, 2013. "Demand for Money in Nepal: An ARDL Bounds Testing Approach," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 25(1), pages 21-36, April.
    12. Birendra Bahadur Budha, 2012. "A Panel Data Analysis of Foreign Trade Determinants of Nepal: Gravity Model Approach," NRB Working Paper 12/2012, Nepal Rastra Bank, Research Department.
    13. Nenavath Sreenu, 2023. "Effect of Exchange Rate volatility and inflation on stock market returns Dynamics - evidence from India," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 14(3), pages 836-843, June.
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    15. E. Chuke Nwude & K. Onochie Offor & Sergius N. Udeh, 2018. "Determinants and Stability of Money Demand in Nigeria," International Journal of Economics and Financial Issues, Econjournals, vol. 8(3), pages 340-353.
    16. Jannatul Ferdaus & Bismark Kusi Appiah & Shapan Chandra Majumder & Anouba Acha Arnaud Martial, 2020. "A Panel Dynamic Analysis on Energy Consumption, Energy Prices and Economic Growth in Next 11 Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 87-99.
    17. Hyunjoo Ryou & Cristina Terra, 2015. "Exchange Rate Dynamics under Financial Market Frictions," THEMA Working Papers 2015-03, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    18. Lau, Wee-Yeap & Yip, Tien-Ming, 2020. "How do monetary transmission channels influence inflation in the short and long run? Evidence from the QQE regime in Japan," The Journal of Economic Asymmetries, Elsevier, vol. 21(C).
    19. Ebenezer Olamide & Andrew Maredza & Kanayo Ogujiuba, 2022. "Monetary Policy, External Shocks and Economic Growth Dynamics in East Africa: An S-VAR Model," Sustainability, MDPI, vol. 14(6), pages 1-19, March.
    20. Luyanda Majenge & Sakhile Mpungose & Simiso Msomi, 2024. "Econometric Analysis of South Africa’s Fiscal and Monetary Policy Effects on Economic Growth from 1980 to 2022," Economies, MDPI, vol. 12(9), pages 1-24, August.
    21. Djaballah Mustapha, 2020. "The Relationship Between the Financial Innovation and the Money Supply: Empirical Study on the Maghreb Countries," Economics and Business, Sciendo, vol. 34(1), pages 168-178, February.
    22. Maame Esi Eshun & George Adu & Emmanuel Buabeng, 2014. "The Financial Determinants of Private Investment in Ghana," International Journal of Financial Economics, Research Academy of Social Sciences, vol. 3(1), pages 25-40.
    23. Hassan, Shahid & Ali, Umbreen & Dawood, Mamoon, 2016. "Measuring Money Demand Function in Pakistan," MPRA Paper 75496, University Library of Munich, Germany.

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    More about this item

    Keywords

    Money demand; ARDL; Stability; Hungary;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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