The Demand for Money in Developing Countries

Download or read book The Demand for Money in Developing Countries written by Mr.Peter Wickham and published by International Monetary Fund. This book was released on 1991-05-01 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Traditional specifications of money demand have been commonly plagued by persistent overprediction, implausible parameter estimates, and highly autocorrelated errors. This paper argues that some of those problems stem from the failure to account for the impact of financial innovation. We estimate money demand for ten developing countries employing various proxies for the innovation process and provide an assessment of the relative importance of this variable. We find that financial innovation plays an important role in determining money demand and its fluctuations, and that the importance of this role increases with the rate of inflation.