Publication Details

This article was originally published as Valadkhani, A, Long- and short-run determinants of the demand for money in the Asian-Pacific countries: an empirical panel investigation, Annals of Economics and Finance, 9(1), 2008, 47-60.


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.

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Annals of Economics and Finance