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A Panel Data Approach to the Demand for Money and the Effects of Financial Reforms in the Asian Countries

Author

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  • Rao, B. Bhaskara
  • Kumar, Saten
Abstract
Three panel data estimation methods are used to estimate the cointegrating equations for the demand for money (M1) in 14 developing Asian countries. Tests for the effects of financial reforms are made with estimates for two sub-samples of 1970-1985 and 1986-2005. Our results show that money demand functions in these Asian countries are stable and financial reforms have yet to have any significant effects. This implies that the central banks of these countries should use money supply, instead of the rate of interest, as the monetary policy instrument.

Suggested Citation

  • Rao, B. Bhaskara & Kumar, Saten, 2008. "A Panel Data Approach to the Demand for Money and the Effects of Financial Reforms in the Asian Countries," MPRA Paper 6565, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:6565
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    References listed on IDEAS

    as
    1. B. Bhaskara Rao & Rup Singh, 2006. "Demand for money in India: 1953-2003," Applied Economics, Taylor & Francis Journals, vol. 38(11), pages 1319-1326.
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    7. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Pedroni; Mark and Sul and Breitung methods; Demand for money; Asian countries; Effects of financial reforms and Choice of monetary policy instruments;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

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