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Investigating the Stability of Money Demand in Ghana

Author

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  • Dennis Nchor

    (Department of Statistics and Operations Analysis, Faculty of Business and Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic)

  • Václav Adamec

    (Department of Statistics and Operations Analysis, Faculty of Business and Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic)

Abstract

The study examined the demand for broad money and its stability in Ghana. Johansen's cointegration approach reveals that the variables were non stationary and cointegrated, therefore, an error correction model, ECM was used to determine the factors that influence real money aggregate in Ghana from 1990 to 2014. The study estimated the results using two set of variables for real demand for money: M1 and M2+. This was done given the assumption that the demand for money was equal to the supply of money. The results show that, GDP affects the level of demand for money in the long run while the interest rate affects it in the short run. The error correction term in each of the cases shows that, 18 % of deviations in the real demand for money is corrected annually. The CUSUM tests of parameter stability showed that, the money demand function was stable over the period and the Chow test indicated that there were no structural breaks.

Suggested Citation

  • Dennis Nchor & Václav Adamec, 2016. "Investigating the Stability of Money Demand in Ghana," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 64(6), pages 2075-2079.
    • Handle: RePEc:mup:actaun:actaun_2016064062075
    DOI: 10.11118/actaun201664062075
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    References listed on IDEAS

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    1. William J. Baumol, 1952. "The Transactions Demand for Cash: An Inventory Theoretic Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 66(4), pages 545-556.
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    6. Ferda Halicioglu & Mehmet Ugur, 2005. "On stability of the demand for money in a developing OECD country: the case of Turkey," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 7(2/3), pages 203-213.
    7. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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    Cited by:

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    3. Yao Kouadio Ange-Patrick & Drama Bedi Guy Herve, 2017. "Comparative Analysis of the Stability of Money Demand between C?te d¡¯Ivoire And Ghana: An Application of ARDL Model," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(11), pages 163-172, November.
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    6. 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.

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