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An Error‐correction Approach to Demand for Money in Five African Developing Countries

Journal of Economic Studies

ISSN: 0144-3585

Publication date: 1 January 1992

Abstract

Applies an error‐correction model to demand for money in five African economies: Congo, Côte d′Ivoire, Mauritius, Morocco and Tunisia. Attention is given to a set of opportunity cost variables including expected inflation, domestic interest rate, foreign interest rate and expected exchange‐rate depreciation. The empirical results show that the domestic interest rate plays a significant role in the demand for money functions for three of the five countries and external opportunity cost variables are significant for one of the others. The results show some diversity in money demand behaviour in the countries studied, but the error correction mechanism is always significant and in four out of five cases there is a short‐run inflation impact. The equations are subjected to a battery of tests and found to be statistically well‐behaved.

Keywords

Citation

Simmons, R. (1992), "An Error‐correction Approach to Demand for Money in Five African Developing Countries", Journal of Economic Studies, Vol. 19 No. 1. https://doi.org/10.1108/01443589210015935

Publisher

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MCB UP Ltd

Copyright © 1992, MCB UP Limited