A Cointegration Analysis of Broad Money Demand in Cameroon

IMF Working Papers, March 1, 2001

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A Cointegration Analysis of Broad Money Demand in Cameroon

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Bibliographic details

• Authors: Jean-Claude Nachega
• Published: March 1, 2001
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451844382.001

Summary and Key Findings

• The study applies cointegration analysis and error-correction modeling to investigate the behavior of broad money demand in Cameroon over 1963/64-1993/94.
• Three steady state relations are identified within the open-economy model of money, prices, income, and a vector of rates of return:
  • A stable money demand function.
  • An excess aggregate demand relationship.
  • The uncovered interest rate relation under fixed exchange rates and perfect capital mobility.
• Empirical support is provided for both PPP and the international Fisher parity between Cameroon and France.
• The stability of the short-run dynamics of the broad money demand function is confirmed.

Methodology

• Techniques used:
  • Cointegrated Vector Autoregression (VAR) analysis.
  • Error-correction modeling.
• Model scope:
  • Open-economy framework incorporating money, prices, income, and a vector of rates of return.
• Sample period:
  • 1963/64-1993/94.

Empirical Results and Interpretation

• Evidence supports purchasing power parity (PPP) between Cameroon and France.
• Evidence supports the international Fisher parity between Cameroon and France.
• The broad money demand function is characterized as stable in steady state.
• Short-run dynamics of the broad money demand function are shown to be stable via error-correction results.

Subjects and Keywords (as listed)

• Subjects: Currencies, Demand for money, Income, Inflation, Monetary base, Money, National accounts, Prices
• Keywords: broad money, broad money velocity, Cameroon, CFA franc, cointegration, correlation coefficient, Currencies, Demand for money, demand function, depreciation rate, fixed exchange rate, function exhibit, Income, income elasticity, inflation, interest rate differential, Monetary base, money demand, opportunity cost, rate of inflation, Sub-Saharan Africa, West Africa, WP

Content in this bundle

• A Cointegration Analysis of Broad Money Demand in Cameroon - WP/01/26
  • A Cointegration Analysis of Broad Money Demand in Cameroon - WP/01/26 (Markdown version)
  • A Cointegration Analysis of Broad Money Demand in Cameroon - WP/01/26 (PDF)