IDEAS home Printed from https://ideas.repec.org/a/pid/journl/v22y1983i1p37-46.html
   My bibliography  Save this article

Household Demand for Money in an Underdeveloped Economy. A Case Study of India

Author

Listed:
  • PREM S. LAUMAS

    (Northern Illinois University, DeKalb.)

  • MARTIN WILLlAMS

    (Northern Illinois University, DeKalb.)

Abstract

The paper tries to overcome some of the empirical problems that are associated with the estimation of demand-for-money function in an underdeveloped economy. It deals explicitly with the choice of functional form and inclusion of interest rate as an explanatory variable to serve as opportunity cost of holding money in the money-demand function using both narrow and broad defmitions of money. The paper concludes that short- or long-period interest rates serve as an opportunity cost of holding money in India only when a narrow defmition of money is used. Time deposits were found to be sensitive to the maturity structure of fmancial instruments. As regards the choice of functional form, the paper holds that it makes no difference whether the function is estimated by linear form or by log-linear form. The paper also confirms for Iridia the results of Friedman's seminal study for the United States.

Suggested Citation

  • PREM S. LAUMAS & MARTIN WILLlAMS, 1983. "Household Demand for Money in an Underdeveloped Economy. A Case Study of India," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 22(1), pages 37-46.
    • Handle: RePEc:pid:journl:v:22:y:1983:i:1:p:37-46
    as

    Download full text from publisher

    File URL: http://www.pide.org.pk/pdf/PDR/1983/Volume1/37-46.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Michael J. Hamburger, 1966. "The Demand for Money by Households, Money Substitutes, and Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 74(6), pages 600-600.
    2. Milton Friedman, 1959. "The Demand for Money: Some Theoretical and Empirical Results," NBER Chapters, in: The Demand for Money: Some Theoretical and Empirical Results, pages 1-29, National Bureau of Economic Research, Inc.
    3. David Laidler, 1966. "The Rate of Interest and the Demand for Money--Some Empirical Evidence," Journal of Political Economy, University of Chicago Press, vol. 74(6), pages 543-543.
    4. Laumas, Prem S, 1978. "Monetization, Economic Development and the Demand for Money," The Review of Economics and Statistics, MIT Press, vol. 60(4), pages 614-618, November.
    5. Laumas, Gurcharan S. & Laumas, Prem S., 1976. "The permanent income hypothesis in an underdeveloped economy," Journal of Development Economics, Elsevier, vol. 3(3), pages 289-297, September.
    6. H. R. Heller, 1965. "The Demand for Money: The Evidence from the Short-Run Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 79(2), pages 291-303.
    7. Rausser, Gordon C. & Laumas, Prem S., 1976. "The stability of the demand for money in Canada," Journal of Monetary Economics, Elsevier, vol. 2(3), pages 367-380, July.
    8. David Laidler, 1966. "Some Evidence on the Demand for Money," Journal of Political Economy, University of Chicago Press, vol. 74(1), pages 55-68.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bhatta, Siddha Raj, 2011. "Stability of demand for money function in Nepal: A cointegration and error correction modeling approach," MPRA Paper 41404, University Library of Munich, Germany.
    2. Michael Bordo & Anna J. Schwartz, 2010. "David Laidler on Monetarism," Palgrave Macmillan Books, in: Robert Leeson (ed.), David Laidler’s Contributions to Economics, chapter 3, pages 44-59, Palgrave Macmillan.
    3. Carlos Acevedo, 2000. "Mecanismos de transmisión de política monetaria con liberalización financiera: El Salvador en los noventa," Monetaria, CEMLA, vol. 0(4), pages 361-412, octubre-d.
    4. Markus Knell & Helmut Stix, 2006. "Three decades of money demand studies: differences and similarities," Applied Economics, Taylor & Francis Journals, vol. 38(7), pages 805-818.
    5. Bordo, Michael D., 1986. "Explorations in monetary history: A survey of the literature," Explorations in Economic History, Elsevier, vol. 23(4), pages 339-415, October.
    6. Francisco Rosende & Luis Oscar Herrera, 1991. "Teoría y Política Monetaria: Elementos para el Análisis," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 28(83), pages 55-94.
    7. Stephen G. Hall & P. A. V. B. Swamy & George S. Tavlas, 2012. "Milton Friedman, the demand for money, and the ECB’s monetary policy strategy," Review, Federal Reserve Bank of St. Louis, vol. 94(May), pages 153-186.
    8. Christian Petit, 1974. "Un test économétrique de l'analyse keynésienne de la demande d'encaisses," Revue Économique, Programme National Persée, vol. 25(3), pages 487-498.
    9. Olga Khon, 0000. "Money Demand: The Guide to Monetary Policy in Russia, 1997-2020," Proceedings of International Academic Conferences 11113164, International Institute of Social and Economic Sciences.
    10. M. K. Lewis, 1978. "Interest Rates and Monetary Velocity in Australia and the United States," The Economic Record, The Economic Society of Australia, vol. 54(1), pages 111-126, April.
    11. repec:onb:oenbwp:y::i:88:b:1 is not listed on IDEAS
    12. Tin, Jan, 1998. "Household demand for financial assets: A life-cycle analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(4), pages 875-897.
    13. Tomoe Moore & Christopher Green & Victor Murinde, 2005. "Portfolio Behaviour in a Flow of Funds Model for the Household Sector in India," Journal of Development Studies, Taylor & Francis Journals, vol. 41(4), pages 675-702.
    14. Michael J. Hamburger, 1987. "A Stable Money Demand Function," Contemporary Economic Policy, Western Economic Association International, vol. 5(1), pages 34-40, January.
    15. Gerdesmeier, Dieter, 1996. "Die Rolle des Vermögens in der Geldnachfrage," Discussion Paper Series 1: Economic Studies 1996,05, Deutsche Bundesbank.
    16. I. U. Mangla, 1979. "An Annual Money Demand Function for Pakistan. Some Further Results," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 18(1), pages 21-33.
    17. Georgopoulos, George J., 2006. "Estimating the demand for money in Canada: Does including an own rate of return matter?," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(4), pages 513-529, September.
    18. Gerdesmeier, Dieter, 1996. "The role of wealth in money demand," Discussion Paper Series 1: Economic Studies 1996,05e, Deutsche Bundesbank.
    19. William Beebe, 1974. "Consumer Credit and the Money Supply," The American Economist, Sage Publications, vol. 18(2), pages 80-83, October.
    20. George S. Tavlas, 2015. "In Old Chicago: Simons, Friedman, and the Development of Monetary‐Policy Rules," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(1), pages 99-121, February.
    21. Mishkin, Frederic S, 1982. "Does Anticipated Monetary Policy Matter? An Econometric Investigation," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 22-51, February.

    More about this item

    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:pid:journl:v:22:y:1983:i:1:p:37-46. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Khurram Iqbal (email available below). General contact details of provider: https://edirc.repec.org/data/pideipk.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.