The determinants and stability of money demand in the Republic of Macedonia

Kjosevski, Jordan (2013) The determinants and stability of money demand in the Republic of Macedonia. Zbornik radova Ekonomskog fakulteta u Rijeci: časopis za ekonomsku teoriju i praksu / Proceedings of Rijeka Faculty of Economics: Journal of Economics and Business, 31 (1). pp. 35-54. ISSN 1331-8004

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Abstract

The goal of this paper is to examine the long and short-run determinants, and
stability of money demand (M1) in the Republic of Macedonia using monthly data
from January 2005 to October 2012. The Johansen cointegration technique and
VECM model were used to fi nd the long-run and short-term dynamic relationships
in money demand model. Empirical results provide the evidence that exchange
rate and interest rate payable on denar time deposits up to one month explains the
most variations of money demand in the long-run, while interest rate is signifi cant
only in short-run. Long-run money demand function is estimated to indicate slow
speed of adjustment of removing the disequilibrium. Our fi nding shows that real
money demand M1 in the Republic of Macedonia is stable in the analyzed period.
The results obtained in this study suggest that the National Bank should carefully
monitor the exchange rate and infl ation as two most important indicators of
monetary policy, because these two determinants are the main drivers of demand
for money in the short and long term.

Item Type:	Article
Subjects:	Scientific Fields (Frascati) > Social Sciences > Economics and Business
Depositing User:	UKLO Mrezha
Date Deposited:	27 May 2024 06:02
Last Modified:	27 May 2024 06:02
URI:	https://eprints.uklo.edu.mk/id/eprint/9985

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