The Stability of Long-Run Money Demand in Western Balkan Countries: An Empirical Panel Investigation

The goal of this paper is to examine the stability of money demand (M1) in five Western Balkan countries using quarterly data from 2005Q1 to 2014Q4. The dynamic ordinary least squares – DOLS method was used to find the long-run relationships in a money demand model. The empirical results identify th...

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Bibliographic Details
Published in:South East European journal of economics and business 2016-12, Vol.11 (2), p.61-70
Main Authors: Kjosevski, Jordan, Petkovski, Mihail, Naumovska, Elena
Format: Article
Language:English
Subjects:
Alliances
C32
cointegration
Cointegration analysis
dynamic ordinary least squares
E41
E52
Economic activity
Economic conditions
Economic models
Estimates
Foreign exchange rates
Hyperinflation
Inflation
Interest rates
Market economies
Monetary policy
money demand
Money supply
Price levels
Recessions
stability
Studies
Transition economies
Western Balkan countries
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Summary:The goal of this paper is to examine the stability of money demand (M1) in five Western Balkan countries using quarterly data from 2005Q1 to 2014Q4. The dynamic ordinary least squares – DOLS method was used to find the long-run relationships in a money demand model. The empirical results identify the long-run money demand relationship among real M1 nominal interest rate, exchange rate, inflation and a dummy variable for the effect of the European debt crisis. The estimated long-run coefficients are, respectively −0.086, 0.519, 0.002 and 0.030. Our findings imply that real money demand in Western Balkan countries was stable in the analyzed period.
ISSN:2233-1999
2233-1999
DOI:10.1515/jeb-2016-0011