Error-correction based panel estimates of the demand for money of selected Asian countries with the extreme bounds analysis |
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Authors: | Saten Kumar B Bhaskara Rao |
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Institution: | 1. Department of Economics, Auckland University of Technology, Private Bag 92006, Auckland 1142, New Zealand;2. School of Economics and Finance, University of Western Sydney, Australia |
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Abstract: | This paper uses the extreme bounds analysis (EBA) of Leamer (1983, 1985) to analyze the robust determinants of the demand for money in a panel of 17 Asian countries for the period 1970 to 2009. These robust determinants are found to be unit root variables. Therefore, cointegration between these variables is tested with a recent time series panel method developed by Westerlund (2007). This method uses the error-correction formulation and has more power against the null of no cointegration. The results show that there is a well-defined long-run demand for money. Using the lagged error correction term from the estimated cointegrating equation, the short-run dynamic relationships are estimated. This paper, thus, suggests some useful guidelines to estimate other relationships with panel data. |
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Keywords: | C33 E41 |
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