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India's money demand function has been the subject of numerous quantitaive research efforts.
Therefore, we ignore the changing opportunity costs arising out of the high volatility of the Bitcoin exchange rate and an explicit modeling of this kind of money demand.
However money demand and money supply dynamics determines interest rates, which consequently impact a country's monetary policy objectives.
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.
Since financial globalization and financial liberalization have become important issues in developing countries, later studies have included foreign opportunity cost variables such as exchange rate and foreign interest rate into money demand models.
In contrast, money demand will decline in response to higher opportunity costs, as money holdings become more expensive relative to real and financial assets.
We emphasise from the outset that precisely what data should be used in the estimation of money demand functions is unclear and that a large part of the literature discuss the importance of alternative data definitions.
12) Finally, shocks to the monetary base and to the money multiplier can have no permanent effect on real money balances while real money demand shocks can, restrictions consistent with long-run monetary neutrality.
Ma-Cornac (1991) employing the OLS method of regression for Japan from 1975 to 1987 investigated the relation between money demand and stock prices.
During the past two decades the focus of researchers remained on the impact of monetary developments on money demand functions.
In this paper, we explain the key linkages between Friedman's work, including the relevance of a stable money demand function, and the strategy adopted by the ECB.
Keywords: Monetary Policy, Inflation, Interest Rate, Welfare Costs, Money Demand Functions