The demand for money in korea: Evidence from the cointegration test |
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Authors: | Jae-Kwang Hwang |
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Institution: | (1) Ouachita Baptist University, U.S.A. |
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Abstract: | This paper shows that there exists a long-run equilibrium relationship between M2 and its determinants, real income and the
long-term interest rate, in Korea by using Johansen and Juselius maximum likelihood cointegration method. However, M1 does
not have any meaningful cointegration relationships with its determinants. The long-term interest rate is a better proxy than
the short-term rate to measure the opportunity cost of holding money. Based on the results, a broad definition of money is
a better measure than a narrow definition of money in considering the long-run economic impacts of changes in monetary policy
in Korea. |
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Keywords: | |
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