The Money Demand Function for Sri Lanka for the Period 1960-2002

概要

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This paper examines the money demand function for Sri Lanka for the post independence period. Since comparatively few studies on money demand behaviour is available for Sri Lanka our objective is to identify the best monetary variable that has to be focused for policy purposes and to identify the relationship of monetary aggregates with other monetary and macro economic variables. Such as the GNP, interest rates and price levels the analyses suggests that there is clear relationship between M1 monetary aggregate and real income, nominal interest rates and price levels. Our findings reveal that the central bank official data may not depict the correct picture in money demand functions hence we may utilise some kind of averages to get stable money demand functions. The M1 money demand could be estimated using the basic money demand specification but not the M2.
2004-03-31