African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4190

Full Length Research Paper

Money demand function with asymmetric adjustment: Evidence on Brazil, Russia, India and China (BRICs)

  Meng-Nan Zhu1, Hai-Yan Yu1, Hsu-Ling Chang1,2 and Chi-Wei Su1,3*        
  1Department of Finance, Xiamen University, Siming South Road, Xiamen, China. 2Department, of International Business, Tamkang University, Taipei, Taiwan. 3Department of Accounting and Information, Lin Tung University, Taichung, Taiwan.
Email: [email protected]

  •  Accepted: 03 September 2010
  •  Published: 31 July 2011

Abstract

 

The long-run equilibrium relationship for the money demand function in the BRICs is investigated by the asymmetrical TAR and M-TAR cointegration tests developed by Enders and Granger (1998), Enders and Siklos (2001). Empirical results indicate that real M2 money balance, real GDP, real exchange rate and deposit rate have a long term relationship under some specific threshold value. Furthermore, we apply asymmetrical error-correction models to test if the money demand of the BRICs exist any nonlinear forms which will be compared with symmetrical error-correction models. Therefore, we find that M2 money demand in the BRICs support the hypothesis of an asymmetrical error correction process and provide better interpretation of macroeconomic meanings in the demand for money.

 

Key words: Money demand function, threshold autoregressive model, asymmetry adjustment, BRICs.

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This article is published under the terms of the Creative Commons Attribution License 4.0

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