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Stability of Money Demand Function in Turkey

Author

Listed:
  • Tümtürk, Oğuz

    (Ordu University)

Abstract

The purpose of this study is to investigate the money demand function and its stability in Turkey using annual data over the period of 1970 and 2013. Based on the three specifications of money demand function, cointegration and the dynamic regression estimation results reveal that more flexible version of money demand specification that links the log of real money balances, ln M/P, to the log of real GDP, ln Y/P, and the log of the nominal interest rate, lni, performs better than the money demand specifications assuming unitary income elasticities. Moreover, based on the stability test on the flexible specification of money demand, the narrow monetary aggregate M1 is found to be stable.

Suggested Citation

  • Tümtürk, Oğuz, 2017. "Stability of Money Demand Function in Turkey," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 8(1), pages 35-48, January.
    • Handle: RePEc:ris:buecrj:0257
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    Cited by:

    1. Emel Siklar & Ilyas Siklar, 2021. "Is There a Change in the Money Demand Stability in Turkey? A Nonlinear Approach," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 7(2), pages 28-42, 06-2021.

    More about this item

    Keywords

    Money Demand; Income and Interest Elasticities; Stability; Dynamic OLS;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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