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Modelling the Demand for Money in Sub-Saharan Africa (SSA)

Author

Listed:
  • Afees Salisu

    (Department of Economics, University of Ibadan)

  • Idris Ademuyiwa

    (Department of Economics, University of Ibadan)

  • Basiru Fatai

    (Department of Economics, University of Ibadan)

Abstract

In this paper, we extend the work of Hamori (2008) to include three main innovations: (i) we consider an open economy version of money demand which is more representative for small open economies like those in SSA; (ii) we consider both the homogenous and heterogeneous panel cointegration methods to estimate the money demand function in SSA; and (iii) we consider specific analyses for the prominent sub-regions in SSA namely, East Africa, South Africa, Central Africa and West Africa in order to further validate the choice of heterogeneous panel cointegration for modelling money demand in SSA. We find a cointegrating relationship among money demand, income, price level, exchange rate and interest rate in SSA and thus, the consideration of an open economy version is fundamental when modelling money demand in SSA. The specific regressions for the sub-regional units in SSA indicate the existence of heterogeneity in regression estimates. Thus, the consideration of heterogeneous panel cointegration method is valid and ignoring this heterogeneity feature when modelling money demand for SSA countries may yield biased and inconsistent results.

Suggested Citation

  • Afees Salisu & Idris Ademuyiwa & Basiru Fatai, 2013. "Modelling the Demand for Money in Sub-Saharan Africa (SSA)," Economics Bulletin, AccessEcon, vol. 33(1), pages 635-647.
    • Handle: RePEc:ebl:ecbull:eb-12-00498
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    References listed on IDEAS

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    Cited by:

    1. John Bosco Nnyanzi, 2018. "The Interaction Effect of Financial Innovation and the Transmission Channels on Money Demand in Uganda," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(12), pages 1-1, December.
    2. Afees A. Salisu & Kazeem Isah, 2017. "A Capital Flight-Growth Nexus in Sub-Saharan Africa: The Role of Macroeconomic Uncertainty," Working Papers 034, Centre for Econometric and Allied Research, University of Ibadan.
    3. Agya Atabani Adi & Joshua Sunday Riti, 2017. "Determination of Long and Short Run Demand for Money in the West African Monetary Zone (WAMZ) Countries: A Panel Analysis," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 2(2), pages 79-97, December.
    4. Ibrahim N Ouattara & Balakissa Kone, 2023. "The effect of exchange rate on the money demand: evidence from ECOWAS countries," Economics Bulletin, AccessEcon, vol. 43(4), pages 1565-1580.
    5. Olofin, S.O. & Olubusoye, O.E. & Mordi, C.N.O. & Salisu, A.A. & Adeleke, A.I. & Orekoya, S.O. & Olowookere, A.E. & Adebiyi, M.A., 2014. "A small macroeconometric model of the Nigerian economy," Economic Modelling, Elsevier, vol. 39(C), pages 305-313.
    6. Sam Olofin & Olusanya Olubusoye & Afees A. Salisu & Alarudeen Aminu & Uwatt B. Uwatt & Micheal A. Adebiyi, 2017. "Revision of the small macro-econometric model of the Nigerian economy," Working Papers 032, Centre for Econometric and Allied Research, University of Ibadan.
    7. Olofin, S.O. & Salisu, A.A & Tule, M.K, 2020. "Revised Small Macro-Econometric Model Of The Nigerian Economy," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 20(1), pages 97-116.
    8. John Paul Dunne & Elizabeth Kasekende, 2018. "Financial Innovation and Money Demand: Evidence from Sub‐Saharan Africa," South African Journal of Economics, Economic Society of South Africa, vol. 86(4), pages 428-448, December.

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    More about this item

    Keywords

    Money demand; Panel Cointegration; Panel ECM; SSA;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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