IDEAS home Printed from https://ideas.repec.org/a/dse/indecr/v41y2006i1p55-80.html
   My bibliography  Save this article

The Money Demand Behaviour in Bangladesh, 1973-2003: An Application of the Cointegration and Error-Correction Methods

Author

Listed:
  • Akhtar Hossain

    (School of Economics, Politics and Tourism, The University of Newcastle NSW 2308, Australia)

Abstract

By applying the methods of cointegration and error-correction, this paper investigates the money demand behaviour in Bangladesh with annual data for the period 1973 to 2003. The empirical results suggest that real money balances (narrow or broad), real permanent income and the deposit rate of interest formed a cointegral relationship for the sample period of study. The dynamic money demand behaviour has been investigated by estimating an error-correction model within a general-to-specific modelling framework. The preferred error-correction model has been found stable. Having identified a stable money demand function, the paper has examined whether there was any structural break in the long-run money demand function during the sample period of study. For this purpose, the Quandt Likelihood Ratio test has been conducted for the period 1982 to 1993 when most financial deregulation and reform measures were undertaken. The test results suggest that there was a structural break in the narrow money demand relationship in 1987 and that there was a structural break in the broad money demand relationship in 1983.

Suggested Citation

  • Akhtar Hossain, 2006. "The Money Demand Behaviour in Bangladesh, 1973-2003: An Application of the Cointegration and Error-Correction Methods," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 41(1), pages 55-80, July.
    • Handle: RePEc:dse:indecr:v:41:y:2006:i:1:p:55-80
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    2. Hossain, Akhand Akhtar, 2010. "Monetary targeting for price stability in Bangladesh: How stable is its money demand function and the linkage between money supply growth and inflation?," Journal of Asian Economics, Elsevier, vol. 21(6), pages 564-578, December.
    3. Kundu, Nobinkhor & Mollah, Muhammad Musharuf Hossain, 2014. "Empirical Approaches to the Post-Keynesian Theory of Demand for Money: An Error Correction Model of Bangladesh," MPRA Paper 65727, University Library of Munich, Germany, revised 14 Oct 2014.

    More about this item

    Keywords

    Money demand; Cointegration; Stability; Financial reforms;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dse:indecr:v:41:y:2006:i:1:p:55-80. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Pami Dua (email available below). General contact details of provider: https://edirc.repec.org/data/deudein.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.