Open AccessFinancial Liberalization and the Stability of Short-run and Long-run Money Demand in Iran
Author(s) -
Maryam Zare
Publication year - 2013
Publication title -
journal of economics and behavioral studies
Language(s) - English
Resource type - Journals
ISSN - 2220-6140
DOI - 10.22610/jebs.v5i1.377
Subject(s) - cointegration , economics , demand for money , short run , liberalization , broad money , structural break , demand curve , monetary economics , unit root test , chow test , error correction model , macroeconomics , monetary policy , econometrics , market economy , microeconomics
Money demand is one of the most important macro-economic variables that could be of great importance to the economic prospect of a country. Therefore, awareness on how this function behaves and by adoption of appropriate economic policies, it is possible, by and large, to avoid the emergence of disorder. The present study, employing the annual time series data related to Iranian economy during 1973-2009, tries to investigate possible relationships between financial liberalization and money demand stability in Iran, in the form of 4 models. To do so, Zivot-Andrews (1992) Unit Root Test was applied in order to clarify endogenous structural changes and Gregory-Hansen (1996) Cointegration Test was administered to investigate the long-run relationships between financial liberalization and money demand stability in Iran, with an emphasis on the structural breaks during the period under study. The results of the study show that by taking the structural break into consideration, there is a significant short and long run relationship between financial liberalization and money demand stability in Iran.