Old wine in a new bottle: money demand causality for 10 Asian countries
Abstract
Purpose
The purpose of this paper is to estimate causality properties between real money demand and a number of determinants, i.e., real output, the lending rate and the real exchange rate, across ten Asian economies.
Design/methodology/approach
The study makes use of the causality methodology of Emirmahmutoglu and Kose (2011) over the period 1990-2012.
Findings
The results document both bidirectional and unidirectional causality between monetary aggregates (M1 and M2) and their determinants for different country groups.
Research limitations/implications
The empirical findings exemplify the role of the demand for money as a policy tool and can provide useful policy guidelines to the Asian central banks in their quest for price stability.
Originality/value
This paper for the first time estimates causality properties between real money demand and a number of determinants, across ten Asian economies that have not used before in the literature. In addition, it employs the innovative methodology of Emirmahmutoglu and Kose (2011). The advantages of this approach are: it overcomes the problem of pre-testing needs to determine the order of integration, the lag orders on the autoregressive coefficients as well as the exogenous variable coefficients are mixed for all the cross-section units of the sample, and it is based on the approach of Meta-analysis which is capable of obtaining common results, combining those provided by a number of independent studies which test the same hypothesis.
Keywords
Acknowledgements
The authors are highly grateful to two referees of this journal for providing comments and suggestions that greatly improved the quality of this paper. Needless to say, the sole responsibility for any remaining errors and omissions is totally the authors’.
Citation
Ajmi, A.N., Apergis, N. and Montasser, G.E. (2015), "Old wine in a new bottle: money demand causality for 10 Asian countries", International Journal of Emerging Markets, Vol. 10 No. 3, pp. 491-503. https://doi.org/10.1108/IJoEM-09-2013-0138
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited