Open AccessOn the Asymmetric Effects of Exchange Rate Changes on the Demand for Money: Evidence from Emerging Economies
Author(s) -
Mohsen BahmaniÓskooee,
Sahar Bahmani,
Ali M. Kutan,
Dan Xi
Publication year - 2019
Publication title -
journal of emerging market finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.215
H-Index - 17
eISSN - 0973-0710
pISSN - 0972-6527
DOI - 10.1177/0972652719831523
Subject(s) - economics , exchange rate , demand for money , currency substitution , monetary economics , currency , emerging markets , demand curve , speculative demand , sample (material) , broad money , interest rate , macroeconomics , microeconomics , foreign exchange risk , chemistry , chromatography
Previous studies, that included the exchange rate in the demand for money function to account for currency substitution, assumed that exchange rate changes have symmetric effects on the demand for money in emerging countries. Since assuming symmetric effects implies using a linear model, they were not successful in finding significant link between the exchange rate movements and the demand for money. When we applied a nonlinear model to address the same issue, we found that in most emerging economies in our sample, exchange rate changes do have significant long-run effects on the demand for money and such effects are indeed asymmetric. JEL Classifications: E41, F31
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