On the Stability of Money Demand in Ghana: A Bounds Testing Approach
IMF Working Papers, November 1, 2011
Source details
- Canonical URL
- On the Stability of Money Demand in Ghana: A Bounds Testing Approach
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Bibliographic details
- Authors: Arto Kovanen, Jihad Dagher
- Published: November 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463925284.001
Research question and methodology
- Objective: Test the stability of the long-run money demand for Ghana.
- Method: Bounds testing procedure developed by Pesaran et al. (2001).
- Authors: Arto Kovanen, Jihad Dagher.
- Date: November 1, 2011.
- Format: IMF Working Paper No. 2011/273; Pages: 18; Volume: 2011; Issue: 273; Stock No: WPIEA2011273; ISBN: 9781463925284; ISSN: 1018-5941; DOI: https://doi.org/10.5089/9781463925284.001.
Key findings
- Strong evidence for the presence of a stable, well-identified long-run money demand for Ghana.
- Stability is observed despite a period of substantial changes in the financial markets.
- Empirical evidence indicates complex dynamics between money demand and its determinants.
- Deviations from the long-run equilibrium are rather short-lived.
Subject coverage and keywords
- Subjects: Bank deposits, Demand for money, Financial services, Foreign exchange, Monetary base, Money, National accounts, Nominal effective exchange rate, Personal income.
- Keywords: Africa, Bank deposits, bounds testing, Demand for money, Ghana, income elasticity, interest rate, Monetary base, monetary policy implementation, money demand, money demand equation, money demand function, money demand relation, money demand stability, money demand study, Nominal effective exchange rate, Personal income, stability, WP.
Policy and analytical implications (as implied by findings)
- A stable, well-identified long-run money demand supports the feasibility of monetary analysis and policy frameworks that rely on money-demand relationships for Ghana.
- Short-lived deviations from equilibrium imply that monetary disturbances or shocks may self-correct relatively quickly, informing monetary policy response horizons.
- Complex dynamics between money demand and determinants suggest careful specification of models used for policy analysis, including consideration of income elasticity, interest rates, exchange rate effects, and financial-market developments.
Publication and access notes
- Working Paper disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress and are published to elicit comments and further debate.
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Source: On the Stability of Money Demand in Ghana: A Bounds Testing Approach, Arto Kovanen and Jihad Dagher, IMF Working Papers 2011, 273 (2011), DOI: https://doi.org/10.5089/9781463925284.001.