Cointegration Analysis of Money Demand During the Period 1987(I)-1999(Iv) in Turkey
Working Paper No. 01-1
16 Pages Posted: 4 Nov 2001
Date Written: 2002
In this study we mainly dealt with money demand in broad sense for the period between 1987(I) when significant reforms related with money policy of Turkey were realised, and 1999(IV) when drastic measures were taken to cope with inflation. Moreover, interrelation between real money demand used in empirical studies for money demand equation, and income, money and treasury bond interest return and inflation were analysed. We applied cointegration test for cointegration analysis and a research was done to find out whether the series were CI(1,1) or not. ADF and PP tests for stationary of were used. It was determined that the series were I (I) when the both tests were used together. Later, a suitable VAR (4) model for cointegration analysis was selected and Granger causality and misspesification ARCH (4) and AR (4) tests were applied. Cointegrating vectors were determined in restricted an unrestricted cointegration analysis, and long-run money demand equation was tried to be stated.
Keywords: Vector autoregressive model, cointegration, money demand, Granger causality, weak exogeneity
JEL Classification: E41, E52
Suggested Citation: Suggested Citation