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Modelling the Demand for Money in Pakistan

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  • Abdul Qayyum

    (Pakistan Institute of Development Economics, Islamabad.)

Abstract

The study estimates the dynamic demand for money (M2) function in Pakistan by employing cointegration analysis and error correction mechanism. The parameters of preferred model are found to be super-exogenous for the relevant class of interventions. It is found that the rate of inflation is an important determinant of money demand in Pakistan. The analysis reveals that the rates of interest, market rate, and bond yield are important for the long-run money demand behaviour. Since the preferred model is superexogenous, it can be used for policy analysis in Pakistan.

Suggested Citation

  • Abdul Qayyum, 2005. "Modelling the Demand for Money in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(3), pages 233-252.
    • Handle: RePEc:pid:journl:v:44:y:2005:i:3:p:233-252
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    Citations

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    Cited by:

    1. Andrew Feltenstein & Luciana Lopes & Janet Porras Mendoza & Sally Wallace, 2013. "“The Impact of Micro-simulation and CGE modeling on Tax Reform and Tax Advice in Developing Countries”: A Survey of Alternative Approaches and an Application to Pakistan," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1309, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. Andrew Feltenstein & Musharraf Cyan, 2012. "A Computational General Equilibrium Approach to Sectoral Analysis for Tax Potential: An Application to Pakistan," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1226, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    3. Ambreen FATEMAH & Abdul QAYYUM, 2018. "Modeling the impact of exports on the economic growth of Pakistan," Turkish Economic Review, KSP Journals, vol. 5(1), pages 56-64, March.
    4. Muhammad Akmal & Muhammad Saleem, 2008. "Technical Efficiency of the Banking Sector in Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 4, pages 61-80.
    5. Adnan Haider & Asad Jan & Kalim Hyder, 2013. "On the (Ir)Relevance of Monetary Aggregate Targeting in Pakistan: An Eclectic View," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 18(2), pages 65-119, July-Dec.
    6. Siffat Mushtaq & Abdul Rashid & Abdul Qayyum, 2012. "On the Welfare Cost of Inflation: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(1), pages 61-96.
    7. Muhammad Ahad, 2017. "Financial Development and Money Demand Function: Cointegration, Causality and Variance Decomposition Analysis for Pakistan," Global Business Review, International Management Institute, vol. 18(4), pages 811-824, August.
    8. Nadeem Ul Haque & Musleh-ud Din & Lubna Hasan, 2007. "Research at PIDE: Key Messages," PIDE Books, Pakistan Institute of Development Economics, number 2007:2, October.
    9. Charles O. Manasseh & Ifeoma C. Nwakoby & Felicia C. Abada & Felix C. Alio & Ogochukwu Okanya, 2021. "Money Demand in Nigeria: Application of Autoregressive Distributed Lag Approach," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(4), pages 308-321, April.
    10. Inayat Ullah Mangla, 2011. "Reconstructing the Performance of Pakistan’s Political Economy: Another Paradigm," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(Special E), pages 30-70, September.
    11. Muhammad Qasim & Khalil Ahmad & Muhammad Irfan Chani, 2021. "Exchange Rate Volatility and Money Demand: An Empirical Analysis of Pakistan," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 7(1), pages 15-25, March.
    12. NGUYEN Huyen Diu & Wade D. Pfau, 2010. "The Determinants and Stability of Real Money Demand in Vietnam, 1999-2009," GRIPS Discussion Papers 10-14, National Graduate Institute for Policy Studies.
    13. Feltenstein, Andrew & Mejia, Carolina & Newhouse, David & Sedrakyan, Gohar, 2017. "The poverty implications of alternative tax reforms: Results from a numerical application to Pakistan," Journal of Asian Economics, Elsevier, vol. 52(C), pages 12-31.
    14. Hanif, M Nadim & Hyder, Zulfiqar & Lodhi, M Amin Khan & Khan, Mahmood ul Hassan & Batool, Irem, 2008. "A small-size macroeconometric model for Pakistan economy," MPRA Paper 22930, University Library of Munich, Germany, revised 2010.
    15. Kashif Ali & Mahmood Khalid, 2019. "Sources to Finance Fiscal Deficit and Their Impact on Inflation: A Case Study of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 58(1), pages 27-43.
    16. Andrew Feltenstein & Carolina Mejia, 2015. "The Poverty Implications of Alternative Tax Reforms: Some Countries Intuitive Results In an Application to Pakistan," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1506, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    17. Hafsa Hina & Abdul Qayyum, 2015. "Re-estimation of Keynesian Model by Considering Critical Events and Multiple Cointegrating Vectors," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(2), pages 123-145.
    18. Hina, Hafsa & Qayyum, Abdul, 2013. "Estimation of Keynesian Exchange Rate Model of Pakistan by Considering Critical Events and Multiple Cointegrating Vectors," MPRA Paper 52611, University Library of Munich, Germany.
    19. Andrew Feltenstein & Biplab DattaAuthor-Email: bdatta2@student.gsu.edu, 2018. "Broad Based Subsidies or Targeted Transfers? An Analysis of the Electricity Subsidy in Pakistan," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1801, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    20. Yannick Roussel & Amjad Ali & Marc Audi, 2021. "Measuring The Money Demand In Pakistan: A Time Series Analysis," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 10(1), pages 27-41, March.
    21. Hanif, Muhammad Nadim, 2014. "Monetary Policy Experience of Pakistan," MPRA Paper 60855, University Library of Munich, Germany.
    22. Muhammad Qasim & Khalil Ahmad & Dr. Muhammad Irfan Chani, 2015. "Exchange Rate Volatility and Money Demand: An Empirical Analysis of Pakistan," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 1(3), pages 131-141, September.
    23. Andrew Feltenstein & Luciana Lopes & Janet Porras-Mendoza & Sally Wallace, 2014. "Modeling tax reform in developing countries," Chapters, in: Richard M. Bird & Jorge Martinez-Vazquez (ed.), Taxation and Development: The Weakest Link?, chapter 3, pages 69-102, Edward Elgar Publishing.
    24. Abdullah, Muhammad & Chani, Muhammad Irfan & Ali, Amjad, 2012. "Determinants of Money Demand in Pakistan: Disaggregated Expenditure Approach," MPRA Paper 50977, University Library of Munich, Germany, revised 2013.
    25. Hina, Hafsa & Qayyum, Abdul, 2015. "Exchange Rate Determination and Out of Sample Forecasting: Cointegration Analysis," MPRA Paper 61997, University Library of Munich, Germany.

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    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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