An Empirical Test of Money Demand in Thailand from 1993 to 2012

10 Pages Posted: 28 Mar 2014

See all articles by Komain Jiranyakul

Komain Jiranyakul

National Institute of Development Administration

Timothy Opiela

DePaul University

Date Written: March 28, 2014

Abstract

In this study, we uses recent time quarterly data obtained from the Bank of Thailand during 1993 and 2012 to investigate the long-run relationship between M1, M2, and M3 money demands and the two determinants (real GDP and interest rate). We use the model specification of Stock and Watson (1993) and Ball (2001). Our estimation techniques include the dynamic ordinary least squares (DOLS) and Johansen cointegration test. The results show that the DOLS procedure is not applicable for our data set. However, the results from Johansen cointegration test reveal that there is only a long-run relationship between M1 money demand, real GDP and interest rate. In the short run, only a change in real GDP affects M1 money holding. The instability of M1 money demand function makes it difficult for monetary authority to conduct a meaningful monetary policy.

Keywords: Real Money Demand, Real Income, Interest Rate, Cointegration, Dynamic OLS

JEL Classification: E41, C22

Suggested Citation

Jiranyakul, Komain and Opiela, Timothy, An Empirical Test of Money Demand in Thailand from 1993 to 2012 (March 28, 2014). Available at SSRN: https://ssrn.com/abstract=2417164 or http://dx.doi.org/10.2139/ssrn.2417164

Komain Jiranyakul (Contact Author)

National Institute of Development Administration ( email )

118 Seri Thai Road
Bangkok, 10240
Thailand

Timothy Opiela

DePaul University ( email )

1 East Jackson Blvd.
Chicago, IL 60604
United States

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