- Title
- In search of a stable narrow money-demand function for Indonesia, 1970-2007
- Creator
- Hossain, Akhtar
- Relation
- Singapore Economic Review Vol. 56, Issue 1, p. 61-77
- Publisher Link
- http://dx.doi.org/10.1142/S0217590811004109
- Publisher
- World Scientific Publishing
- Resource Type
- journal article
- Date
- 2011
- Description
- This paper adopts the Johansen approach to cointegration to estimate a narrow money-demand function for Indonesia with annual data for the period 1970-2007. Empirical results suggest that there exists a cointegral relationship between real narrow balances, real permanent income and the deposit rate of interest. The recursive and rolling regression results suggest that the narrow money-demand function has remained largely stable irrespective of ongoing financial reforms in Indonesia since the late 1980s and/or financial crises in the late 1990s. The Quandt-Andrews breakpoint and the Hansen-Johansen stability tests results however suggest that the narrow money-demand relationship had a structural break in the early 1990s. This corresponds to a period of time when the banking and financial reforms in Indonesia took effect. The Chow breakpoint test results suggest that there was also a structural break in the money-demand relationship during the financial crises of the late 1990s.[
- Subject
- Chow's breakpoint test; Indonesia; Johansen cointegration approach; narrow money-demand; Quandt-Andrews breakpoint test; Hansen-Johansen stability test
- Identifier
- http://hdl.handle.net/1959.13/1047043
- Identifier
- uon:14729
- Identifier
- ISSN:0217-5908
- Language
- eng
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