Our analyses of productivity and money demand
shocks thus begin with this case.
The organisation of this paper is as follows; the next section presents the brief literature survey on financial liberalisation and money demand
, and financial liberalisation in Sri Lankan context.
In contrast, money demand
will decline in response to higher opportunity costs, as money holdings become more expensive relative to real and financial assets.
To identify the remaining parameters ([alpha], B, [theta]), I find the best fit to annual money demand
as a function of i and [delta].
We use time-series data over the period 1960 to 2007 for monetary aggregates, namely, the monetary base, M1, currency and demand deposits, gross domestic product (GDP), and nominal interest rates, to estimate both semi-log and double log (aka log-log and log-lin, respectively) money demand
In this way we link the literature on regional money demand
(Mulligan and Sala-i-Martin 1992) to recent aggregate studies that have included housing wealth in the money demand
function (Boone and van den Noord 2008; Greiber and Setzer 2007).
Starting from the consumer's utility function, Atta-Mensah (2004) includes in the Canadian money demand
equation a measure of uncertainty derived through conditional variance.
An important implication of the money demand
approach to dollarisation and currency substitution, as illustrated in articles cited in the terminology section, such as Cairo and Vegh, is that empirical money demand
functions for domestic, unindexed money are likely to exhibit instability or pathological behaviour that is not consistent with the well-developed theory of money demand
But now consider the case where the interest elasticity of money demand
is relatively high but falls short of being perfectly elastic.
A large body of literature has emerged that investigates long-run properties of the conventional money demand
equation for various countries.
We find that the parameters of the money demand
function are time-varying and that our ability to explain money demand
also varies over time.
He quickly realizes that to truly understand the impact of credit and debit cards, he will have to understand their impact on money demand
(specifically M1 and M2).