Dynamic modelling of the demand for money in Latvia
Dynamic modelling of the demand for money in Latvia
Author(s): Boriss SiliverstovsSubject(s): National Economy, Economic history, Economic policy, Economic development, Transformation Period (1990 - 2010), EU-Accession / EU-DEvelopment, Financial Markets
Published by: BICEPS/SSE Riga
Keywords: M2 money demand; stability; new EU Member States; Latvia;
Summary/Abstract: This study develops a money demand model for Latvia for the period from 1996 to 2006. The model is specified in the error-correction form based on a single co-integrating vector between real money balances, gross domestic product, long-term interest rate, and the rate of inflation. The model meets all three requirements for ‘stability’ put forward in Judd and Scadding (1982). The model is both well-specified and highly parsimonious. It demonstrates high explanatory power in sample as well as accurately forecasting real money balances out of sample.
Journal: Baltic Journal of Economics
- Issue Year: 8/2008
- Issue No: 1
- Page Range: 53-74
- Page Count: 22
- Language: English