IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/31430.html
   My bibliography  Save this paper

Monetary aggregates in Pakistan: theoretical and empirical underpinnings

Author

Listed:
  • Khan, Mahmood ul Hasan
  • Hussain, Fida

Abstract

The objective of this study is to analyze theoretical as well as empirical soundness of the current monetary aggregates (M2) and to propose a broader monetary aggregate (M3), by exploring the functional characteristics and empirical relevance of financial assets. We used annual time series data from FY76 to FY03 and employed both the functional and empirical (F-M dual criteria) approaches. The results indicate that current monetary aggregates seemed to have been defined more on functional considerations compared to the empirical evidence. The analysis of new set of financial assets suggests that, while the various savings schemes individually as well as in aggregate were able to meet F-M dual criteria, deposits of NBFIs failed to satisfy this criteria. However, the functional considerations suggest that these deposits should, nevertheless, be included in a broader definition of monetary aggregates (M3).

Suggested Citation

  • Khan, Mahmood ul Hasan & Hussain, Fida, 2005. "Monetary aggregates in Pakistan: theoretical and empirical underpinnings," MPRA Paper 31430, University Library of Munich, Germany, revised 2005.
    • Handle: RePEc:pra:mprapa:31430
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/31430/1/MPRA_paper_31430.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Laidler, David, 1969. "The Definition of Money: Theoretical and Empirical Problems," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(3), pages 508-525, August.
    2. Chetty, V Karuppan, 1969. "On Measuring the Nearness of the Near-Moneys," American Economic Review, American Economic Association, vol. 59(3), pages 270-281, June.
    3. Moroney, John R & Wilbratte, Barry J, 1976. "Money and Money Substitutes: A Time Series Analysis of Household Portfolios," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 8(2), pages 181-198, May.
    4. Koot, Ronald S, 1975. "A Factor Analytic Approach to an Empirical Definition of Money," Journal of Finance, American Finance Association, vol. 30(4), pages 1081-1089, September.
    5. NAJAM us SAQIB & ALlY A H. KHAN, 1988. "On an Empirical Definition of Money for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 27(4), pages 853-859.
    6. Mr. Ewe-Ghee Lim & Mr. Subramanian S Sriram, 2003. "Factors Underlying the Definition of Broad Money: An Examination of Recent U.S. Monetary Statistics and Practices of Other Countries," IMF Working Papers 2003/062, International Monetary Fund.
    7. Milton Friedman & Anna Jacobson Schwartz, 1970. "Monetary Statistics of the United States: Estimates, Sources, Methods," NBER Books, National Bureau of Economic Research, Inc, number frie70-1.
    8. John R. Walter, 1989. "Monetary aggregates: a user's guide," Economic Review, Federal Reserve Bank of Richmond, vol. 75(Jan), pages 20-28.
    9. Syed Muhammad Tariq & Kent Matthews, 1997. "The Demand for Simple-sum and Divisia Monetary Aggregates for Pakistan: A Cointegration Approach," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(3), pages 275-291.
    10. Richard G. Anderson & Kenneth A. Kavajecz, 1994. "A historical perspective on the Federal Reserve's monetary aggregates: definition, construction and targeting," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 1-31.
    11. Laumas, Gurcharan S, 1969. "Savings Deposits in the Definition of Money," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 892-896, Nov./Dec..
    12. Milton Friedman & Anna Jacobson Schwartz, 1970. "Introduction to "Monetary Statistics of the United States: Estimates, Sources, Methods"," NBER Chapters, in: Monetary Statistics of the United States: Estimates, Sources, Methods, pages 1-85, National Bureau of Economic Research, Inc.
    13. Estrella, Arturo & Mishkin, Frederic S., 1997. "Is there a role for monetary aggregates in the conduct of monetary policy?," Journal of Monetary Economics, Elsevier, vol. 40(2), pages 279-304, October.
    14. Alfred Broaddus, 1975. "Aggregating the monetary aggregates : concepts and issues," Economic Review, Federal Reserve Bank of Richmond, vol. 61(Nov).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Khan, Rana Ejaz Ali & Gill, Abid Rashid, 2007. "Impact of Supply of Money on Food and General Price Indices: A Case of Pakistan," MPRA Paper 16293, University Library of Munich, Germany.

    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. William A Barnett & Unja Chae & John W Keating, 2012. "Forecast Design In Monetary Capital Stock Measurement," Global Journal of Economics (GJE), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 1-53.
    2. Anderson, Richard G. & Duca, John V. & Fleissig, Adrian R. & Jones, Barry E., 2019. "New monetary services (Divisia) indexes for the post-war U.S," Journal of Financial Stability, Elsevier, vol. 42(C), pages 3-17.
    3. Sophie Altermatt, 2018. "The Long-Run Demand for M2 Reconsidered," Diskussionsschriften dp1824, Universitaet Bern, Departement Volkswirtschaft.
    4. Benati, Luca, 2009. "Long run evidence on money growth and inflation," Working Paper Series 1027, European Central Bank.
    5. Raghbendra Jha & Ibotombi Longjam, 2008. "A Divisia type saving aggregate for India," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 1(1), pages 51-66.
    6. Calomiris, Charles W. & Mason, Joseph R. & Wheelock, David C., 2011. "Did Doubling Reserve Requirements Cause the Recession of 1937-1938? A Microeconomic Approach," Working Papers 11-03, University of Pennsylvania, Wharton School, Weiss Center.
    7. Vijay VICTOR & Maria FEKETE FARKAS & Florence JEESON, 2018. "Inflation unemployment dynamics in Hungary – A structured cointegration and vector error correction model approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(615), S), pages 195-204, Summer.
    8. William A. Barnett, 2000. "Which Road Leads to Stable Money Demand?," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 577-592, Emerald Group Publishing Limited.
    9. Oluwaseun Okikiola, 2021. "The Impact of Money Market Dynamics on the Economic Growth of Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(10), pages 77-85, October.
    10. Apostolos Serletis, 2017. "An Interview with William A. Barnett," Econometrics, MDPI, vol. 5(4), pages 1-32, October.
    11. Rockoff, Hugh, 2022. "Milton Friedman on bailouts," Journal of Financial Stability, Elsevier, vol. 63(C).
    12. William A. Barnett, 2013. "Friedman and Divisia Monetary Measures," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201312, University of Kansas, Department of Economics, revised Dec 2013.
    13. Barnett, William A. & Chauvet, Marcelle, 2011. "How better monetary statistics could have signaled the financial crisis," Journal of Econometrics, Elsevier, vol. 161(1), pages 6-23, March.
    14. Ignacio Briones & Hugh Rockoff, 2005. "Do Economists Reach a Conclusion on Free-Banking Episodes?," Econ Journal Watch, Econ Journal Watch, vol. 2(2), pages 279-324, August.
    15. McCallum, Bennett T. & Nelson, Edward, 2010. "Money and Inflation: Some Critical Issues," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 3, pages 97-153, Elsevier.
    16. Darrat, Ali F. & Al-Mutawa, Ahmed, 1996. "Modelling money demand in the United Arab Emirates," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(1), pages 65-87.
    17. Nelson, Edward, 2003. "The future of monetary aggregates in monetary policy analysis," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 1029-1059, July.
    18. Roberto Robatto, 2015. "Financial Crises and Systemic Bank Runs in a Dynamic Model of Banking," 2015 Meeting Papers 483, Society for Economic Dynamics.
    19. Jocelyn Horne & Vance Martin & Shane Bonetti, 1986. "Asset Substitution and Aggregate Liquidity in Australia: 1969–1983," The Economic Record, The Economic Society of Australia, vol. 62(1), pages 22-36, March.
    20. Patrice Baubeau & Eric Monnet & Angelo Riva & Stefano Ungaro, 2021. "Flight‐to‐safety and the credit crunch: a new history of the banking crises in France during the Great Depression," Economic History Review, Economic History Society, vol. 74(1), pages 223-250, February.

    More about this item

    Keywords

    Monetary Aggregates; Pakistan;

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

    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:pra:mprapa:31430. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.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.