Publication Date

June 2006

Publication Details

Valadkhani, A, What Determines the Demand for Money in the Asian-Pacific Countries? An Empirical Panel Investigation, Working Paper 06-11, Department of Economics, University of Wollongong, 2006.


This paper examines the long- and short-run determinants of the demand for money in six countries in the Asian-Pacific region using panel data (1975-2002). Various country-specific coefficients are allowed to capture inter-country heterogeneities. Consistent with theoretical postulates, it is found that (a) the demand for money in the long-run positively responds to real income and inversely to the interest rate spread, inflation, the real effective exchange rate, and the US real interest rate; (b) the long-run income elasticity is greater than unity; and (c) both the currency substitution and capital mobility hypotheses hold only in the long run.