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A panel data approach to the demand for money and the effects of financial reforms in the Asian countries

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  • Rao, B. Bhaskara
  • Kumar, Saten

Abstract

Alternative panel data estimation methods are used to estimate the cointegrating equations for the demand for money (M1) for a panel of 14 Asian countries from 1970 to 2005. The effects of financial reforms are analyzed with estimates for two sets of sub-samples and two break dates. Our results show that money demand function has been stable and financial reforms are yet to have any significant effects. Since there is no evidence for instability in the demand for money, the central banks of these countries should use money supply, instead of the rate of interest, as the monetary policy instrument.

Suggested Citation

  • Rao, B. Bhaskara & Kumar, Saten, 2009. "A panel data approach to the demand for money and the effects of financial reforms in the Asian countries," Economic Modelling, Elsevier, vol. 26(5), pages 1012-1017, September.
    • Handle: RePEc:eee:ecmode:v:26:y:2009:i:5:p:1012-1017
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    More about this item

    Keywords

    Pedroni Mark and Sul and Breitung methods Demand for money Asian countries Effects of financial reforms and choice of monetary policy instruments;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

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