The Determinants of Money Demand Function in the ASEAN-5 Countries
The Determinants of Money Demand Function in the ASEAN-5 Countries

Summary/Abstract: The purpose of this paper is to examine the long-run and short-run determinants of money demand function in the ASEAN-5 countries, including Thailand, Singapore, Malaysia, Philippines, and Indonesia. The research was conducted by using secondary data sets from the ASEAN- 5 countries, covering the time period from 1990 to 2014. The paper was started by using unit root test for detecting a stationary of each variable that included in the models. Then, co-integration approach was applied for estimating the long-run determinant of money demand function. After that, Vector Error Correction Model was used to test the short-run determinant of money demand function. The results indicate that income has relationship with money demand in Thailand, Singapore, and Indonesia. The exchange has effect in money demand in Indonesia. Price level has relationship with money demand in every country in ASEAN-5 except Thailand. In addition, change in domestic interest rate has significant related with money demand function in Singapore and Indonesia. However, the foreign interest rate has significant related with the long run money demand in Thailand, Malaysia, and Indonesia. The results of this research could be used as a guideline for the central bank in ASEAN counties to set an effectiveness monetary policy.

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