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AuthorDarrat, A.F.
AuthorAl-Sowaidi, S.S.
Available date2009-12-27T07:15:29Z
Publication Date2009-03-02
Publication NameReview of Financial Economics
Identifierhttp://dx.doi.org/10.1016/j.rfe.2009.04.003
CitationAli F. Darrat, Saif S. Al-Sowaidi, Financial progress and the stability of long-run money demand: Implications for the conduct of monetary policy in emerging economies, Review of Financial Economics, Volume 18, Issue 3, August 2009, Pages 124-131
URIhttp://hdl.handle.net/10576/10473
AbstractThis paper examines whether recent financial changes in three emerging market economies in the Gulf region (Bahrain, the UAE, and Qatar) have distorted the character and the stability of their underlying long-run money demand relations. Money demand instability prompts concerns about the appropriateness of targeting monetary aggregates and could weaken the presumed link between monetary policy and its ultimate objectives. Our results suggest that the quick pace of financial changes in the three emerging market economies did not cause undue shifts in their equilibrium money demand relations. Further evidence from direct tests of cointegration stability indicates the superiority of targeting M1 in the UAE and M2 for Qatar. In Bahrain, both M1 and M2 prove equally appropriate to guide monetary policy. Thus, despite the wave of financial developments that have recently swept the three Gulf economies, the evidence suggests that monetary authorities in these countries should maintain a close watch on monetary growth as a principal policy guide.
Languageen
PublisherElsevier Inc.
SubjectFinancial development
SubjectMoney demand instability
SubjectMonetary policy
SubjectCointegration
SubjectGCC region
TitleFinancial progress and the stability of long-run money demand: Implications for the conduct of monetary policy in emerging economies
TypeArticle


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