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On the nexus between Stock Market Fluctuations and the Demand for Money in Saudi Arabia

Author

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  • Moayad Al Rasasi
  • Fares Rawah
  • Bander Alghamdi

Abstract

This research paper estimates the augmented money demand function for Saudi Arabia while incorporating stock prices as one of the key determinants and utilizing quarterly data spanning over the period of 2010-2018. The estimated money demand function coincides with theoretical expectation regarding income and interest rate over long run. In Particular, the demand for money is statistically significant and positively related with income while it's negatively related with interest rate. On stock prices, the findings suggest that they are statistically significant and have positive impact on money demand over the long run. Moreover, the estimated error correction model indicates that it takes money demand about two quarters to adjust to its equilibrium condition.

Suggested Citation

  • Moayad Al Rasasi & Fares Rawah & Bander Alghamdi, 2020. "On the nexus between Stock Market Fluctuations and the Demand for Money in Saudi Arabia," Business and Economic Research, Macrothink Institute, vol. 10(1), pages 142-154, March.
    • Handle: RePEc:mth:ber888:v:10:y:2020:i:1:p:142-154
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    References listed on IDEAS

    as
    1. Lee, Chien-Chiang & Chang, Chun-Ping & Chen, Pei-Fen, 2008. "Money demand function versus monetary integration: Revisiting panel cointegration among GCC countries," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 79(1), pages 85-93.
    2. Moayad H. Al Rasasi & John H. Qualls, 2020. "Revisiting the Demand for Money in Saudi Arabia," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 8(1), pages 38-45.
    3. Moayad H. Al Rasasi & John H. Qualls, 2020. "Revisiting the Demand for Money in Saudi Arabia," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 8(1), pages 38-45.
    4. Mouyad Alsamara & Zouhair Mrabet & Michel Dombrecht & Karim Barkat, 2017. "Asymmetric responses of money demand to oil price shocks in Saudi Arabia: a non-linear ARDL approach," Applied Economics, Taylor & Francis Journals, vol. 49(37), pages 3758-3769, August.
    5. Bahmani-Oskooee, Mohsen & Shabsigh, Ghiath, 1996. "The demand for money in Japan: Evidence from cointegration analysis," Japan and the World Economy, Elsevier, vol. 8(1), pages 1-10, March.
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    Cited by:

    1. Moayad H. Al Rasasi & John H. Qualls, 2020. "Revisiting the Demand for Money in Saudi Arabia," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 8(1), pages 38-45.
    2. Moayad H. Al Rasasi & Soleman O. Alsabban & Omar A. Alarfaj, 2019. "Does Stock Market Performance Affect Economic Growth? Empirical Evidence from Saudi Arabia," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(9), pages 1-21, September.

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    More about this item

    Keywords

    stock prices; money demand; Cointegration; Saudi Arabia; ECM;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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