The stability of money demand function in GCC countries: An ARDL model approach

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2019

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Saudi Digital Library

Abstract

Due to the important role of a stable money demand function in assessing the effectiveness of monetary policy. This study employs ARDL approach to investigate the M3 money demand function in GCC countries. The paper also uses CUSUMSQ and CUSUM tests to study the stability of the money demand in the six GCC countries. ADF and PP unit root tests indicate that variables are integrated of order one. The results reveal that M3 is cointegrated with real output, interest rate and inflation in the Gulf Cooperation Council countries across the period understudy. The CUSUM and CUSUMSQ tests indicate instability of M3 money demand function across the GCC countries

Description

Money demand function
GCC
Stability
ARDL
CUSUM
CUSUMSQ

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