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Demand for Money in the Transition Economy : The Case of the Czech Republic 1993–2001

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  • Komárek Luboš
  • Melecký Martin

Abstract

In this paper we strive to present a somewhat internationalised view of demand for money as applied to the Czech Republic. We extend the traditional money demand function, consisting purely of domestic variables, to include certain foreign determinants that probably affect the demand for money in a small open transition economy. We do so in the case of both narrow and broad money. For the purposes of generalisation and robust estimates we employ several estimation techniques, namely the Johansen procedure, ARDL, DOLS and ADL. We also consider the aspect of the stability of such estimates. Finally, we analyse the possible effects on prices and output of disequilibria on money market. We have found that a liquidity gap probably has a significant influence on both prices and output.

Suggested Citation

  • Komárek Luboš & Melecký Martin, 2001. "Demand for Money in the Transition Economy : The Case of the Czech Republic 1993–2001," The Warwick Economics Research Paper Series (TWERPS) 614, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:614
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    References listed on IDEAS

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    Cited by:

    1. Yu Hsing, 2006. "Tests of Functional Forms, Currency Substitution, and Capital Mobility of Czech Money Demand Function," Prague Economic Papers, Prague University of Economics and Business, vol. 2006(4), pages 291-299.
    2. Hyunjoo Ryou & Cristina Terra, 2015. "Exchange Rate Dynamics under Financial Market Frictions," THEMA Working Papers 2015-03, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.

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    More about this item

    Keywords

    Demand for money ; transmission mechanism ; transition ; Czech Republic ; cointegration;
    All these keywords.

    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General

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