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Money Market Equilibrium in the Czech Republic

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  • Jana Juriová

Abstract

This paper examines the theoretical concept of equilibrium in the money market that is empirically verified for the economy of the Czech Republic. The subject of the analysis is the relationship defining equilibrium in the domestic money market, i.e. when money demand corresponds to the money supply in the economy. The main objective is to determine whether such a long-term equilibrium relationship exists by verifying this assumption on real data for the Czech economy. The Johansen cointegration approach is applied for modelling the money demand function including four domestic macroeconomic indicators: money supply, price level, gross domestic product, and interest rate. The results suggest that the level of real money supply fluctuated around the estimated long-run equilibrium value in the analysed period 2000-2013.

Suggested Citation

  • Jana Juriová, 2016. "Money Market Equilibrium in the Czech Republic," Prague Economic Papers, Prague University of Economics and Business, vol. 2016(3), pages 321-334.
    • Handle: RePEc:prg:jnlpep:v:2016:y:2016:i:3:id:564:p:321-334
    DOI: 10.18267/j.pep.564
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    References listed on IDEAS

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    More about this item

    Keywords

    OLS; money supply; money market; money demand; long-run equilibrium; error-correction model; cointegration;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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