Abstract
Although the theoretical debate on money demand is not new yet the empirical literature is inconclusive regarding the role and contribution of macroeconomic factors in determining money demand function and its stability. This study explores, empirically, the role of economic and monetary uncertainties in determining money demand function for Pakistan over the time period from 1975 to 2018. Upon checking the prerequisite of the technique, the empirical assessment is carried out using the autoregressive distributed lag (ARDL)model. The findings specify that money demand function is responsive to major macroeconomic variables including both the uncertainty measures. In particular, economic uncertainty tends to diminish while monetary uncertainty appears to increase money demand in the long run. It follows from the results that economic agents in Pakistan are more sensitive to economic uncertainty as compared to monetary uncertainty with regard to their decision for cash balances.
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Article Details
- Year: 2022
- Volume: 43
- Issue: 3
- Pages: 71 - 96
- Accepted: 08.04.2022
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DOI:
https://doi.org/10.5281/zenodo.16900119 -
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How to Cite?
Tahir Mukhtar, Zainab Jehan (2022). Do Economic Uncertainty and Monetary Uncertainty Matter for Money Demand? Evidence from Pakistan. Journal of Economic Cooperation and Development, 43(3), 71-96. https://doi.org/10.5281/zenodo.16900119
