Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/314168 
Year of Publication: 
2022
Citation: 
[Journal:] Journal of Applied Economics [ISSN:] 1667-6726 [Volume:] 25 [Issue:] 1 [Year:] 2022 [Pages:] 385-411
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
This paper reviews earlier studies and shows that the money demand (MD) relationship under a fixed exchange rate (ER) regime differs from that under a floating ER regime, mainly due to the limited role of monetary policy in the former regime. It then empirically demonstrates that an open-economy model augmented with country-specific factors is a better framework for characterizing the MD function under a fixed ER regime by applying cointegration and equilibrium correction modeling to the Saudi data as a case study. The main message for monetary authorities is that there are other factors, besides those theoretically predicted, shaping MD under a fixed ER regime. This information is important for providing adequate money supply to support economic growth and maintain the stability of the fixed ER, as well as for checking the stability of the MD to make appropriate policy decisions.
Subjects: 
autometrics
cointegration
fixed exchange rate
monetary policy
money demand
oil price
Saudi Arabia
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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