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Modelling Asymmetric Cointegration of Money Demand in Türkiye: Bounds Testing Approach

Year 2022, Volume: 6 Issue: 2, 87 - 103, 19.10.2022

Abstract

This study empirically investigates stability of narrow money demand function and the asymmetric long-run cointegrating relationships between real money demand and its determinants in Türkiye with monthly data over the period between 2010:January and 2021:December by using modified version of traditional autoregressive distributed lag model, which captures nonlinearities. In money demand specification, this study uses M1 to measure real narrow money demand, real private consumption expenditure, weighted average interest rates for deposit in TL, and exchange rate to assess long-run relationships. We find that monetary aggregate is stable over the sample horizon, suggested by CUSUM and CUSUMQ parameter stability tests. While traditional autoregressive distributed lag model cannot observe a cointegration for money demand function, modified version, which considers nonlinearities, allows us to observe long-run level relationship for money demand function in Türkiye.

References

  • Albulescu, C. T., Pépin, D. (2018), “Monetary Integration, Money-Demand Stability, and the Role of Monetary Overhang in Forecasting Inflation in CEE Countries”, Journal of Economic Integration, 33(4): 841-879.
  • Akıncı, Ö. (2003), “Modeling the Demand for Currency Issued in Turkey”, Central Bank Review, 3(1).
  • Algan, N., Gencer, S. (2011), “Türkiye’de Para Talebi Fonksiyonunun Modellenmesi”, Çukurova Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 20(1): 195-211.
  • Arango, S., Nadiri, M. I. (1981), “Demand for Money in Open Economies”, Journal of Monetary Economics, 7: 69-83.
  • Avouyi-Dovi, S., Drumetz, F., and Sahuc, J-G. (2012), “The Money Demand Function for the Euro Area: Some Empirical Evidence”, Bulletin of Economic Research, 64(3): 377-392.
  • Bae, Y., Kakkar, V., and Ogaki, M. (2006), “Money Demand in JAPAN and Nonlinear Cointegration”, Journal of Money, Credit and Banking, 38(6): 1659-1667.
  • Bahmani-Oskooee, M. Karacal, M. (2006), “The Demand for Money in Turkey and Currency Substitution”, Applied Economics Letters, 13(10): 635-642.
  • Bahmani-Oskooee, M., Nayeri, M. M. (2020), “Policy Uncertainty and Demand for Money in Japan”, Review of Economic Analysis, 12: 73-87.
  • Benchimol, J., Qureshi, I. (2019), “Time-Varying Money Demand and Real Balance Effects”, Globalization Institute WP 364 Fed Dallas, https://doi.org/10.24149/gwp364 (25.08.2022)
  • Brand, C., Cassola, N. (2004), “A Money Demand System for Euro Area M3”, Applied Economics, 36(8): 817-838.
  • Choi, W. G. and Cook, D. (2007). “Financial Market Risk and US Money Demand”, IMF WP 07/89. https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Financial-Market-Risk-and-U-S-20643 (01.09.2022)
  • Dedeoglu, D., Ogut, K. (2018), “Examination of Money Supply Endogeneity in Turkey: Evidence from asymmetric causality test”, Cogent Economics & Finance, 6(1).
  • Dickey, D. A., Fuller, W. A. (1979). “Distribution of the Estimators for Autoregressive Time Series with a Unit Root.” Journal of American Statistical Association, 74(306): 427–431.
  • Dreger, C., Wolters, J. (2010), “Investigating M3 Money Demand in the Euro Area”, Journal of International Money and Finance, 29: 111-122.
  • Friedman, M. (1956), “The Quantity Theory of Money: A Restatement”, In: Friedman, M., Ed., The Optimum Quantity of Money, Aldine Publishing Company, Chicago, 3-41.
  • Hafer, R. W., Jansen, D. W. (1991), “The Demand for Money in the US: Evidence from cointegration tests”, Journal of money, Credit and Banking, 23(2): 155-168.
  • Kurihara, Y. (2016), “Demand for Money Under Low Interest Rates in Japan”, Journal of Economics and Financial Studies, 4(4): 12-19.
  • Lucas, R.E. (1988), “Money Demand in the United States: A quantitative review”, Carnegie-Rochester Conference Series on Public Policy, 29: 137–168.
  • Lütkepohl, H. (1993), “The Sources of the US Money Demand Instability”, Empirical Economics, 18: 729-743.
  • Meltzer, A. H. (1963), “The Demand for Money: The Evidence from the Time Series”, Journal of Political Economy, 71(3): 219-246.
  • Mundell, R. A. (1963), “Capital Mobility and Stabilization Policy Under Fixed and Flexible Exchange Rates”, The Canadian Journal of Economics and Political Science, 29(4): 475-485.
  • Özcan, B., Arı, A. (2013), “Para Talebinin Belirleyenleri ve İstikrarı Üzerine Bir Uygulama: Türkiye Örneği”, Yönetim ve Ekonomi Dergisi, 20(2): 105-120.
  • Pérez, A.S. (2014), “Cointegration Analysis of Money Demand in the Euro Area”, https://addi.ehu.es/bitstream/handle/10810/14503/TFG_Salazar.pdf?sequence=2 (26.05.2022)
  • Pesaran, M. H., Shin, Y. (1999), “An Autoregressive Distribute Lag Modeling Approach to Cointegration Analysis”, In Strom, S., Ed., Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, Cambridge University Press.
  • Pesaran, M. H., Shin, Y., and Smith, R. J. (2001), “Bounds Testing Approaches to the Analysis of Level Relationships”, Journal of Applied Econometrics, 16: 289–326.
  • Phillips, P. C. B., Perron, P. (1988), “Testing for a Unit Root in Time Series Regression”, Biometrika,75(2): 335–346.
  • Scheiblecker, M. (2012), “Modelling Short-run Money Demand for the USA”, Austrian Institute of Economic Research WIFO Working Papers, No. 442, https://www.econstor.eu/bitstream/10419/128990/1/wp_442.pdf (15.08.2022)
  • Shin, Y., Yu, B., and Greenwood-Nimmo, M. (2014). “Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework.” Festschrift in Honor of Peter Schmidt. Springer, New York, NY.
  • Sprenkle, C. M., Miller, M. H. (1980), “The Precautionary Demand for Narrow and Broad Money”, Economica, 47(188): 407-421.
  • Tobin, J. (1956), “The Interest-Elasticity of Transactions Demand for Cash”, The Review of Economics and Studies, 38(3): 241-247.
  • Tümtürk, O. (2017), “Stability of Money Demand Function in Turkey”, Business and Economics Research Journal, 8(1): 35-48.
  • URL 1: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Core+Functions/Monetary+Policy/Central+Bank+Monetary+Policy+Framework
  • Yılancı, V. (2015), “Türkiye'de Para Talebi İstikrarlılığının Testi: Kayan Pencerelerde Sınır Testi Yaklaşımı”, Dumlupınar Üniversitesi Sosyal Bilimler Dergisi, (33): 67-74.

Türkiye’ de Para Talebinin Asimetrik Eşbütünleşme Modellemesi: Sınır Testi Yaklaşımı

Year 2022, Volume: 6 Issue: 2, 87 - 103, 19.10.2022

Abstract

Bu çalışma Türkiye’de dar para talebi fonksiyonunun istikrarlılığını ve para talebi ile para talebinin belirleyicileri arasındaki asimetrik uzun dönem ilişkisini 2010:Ocak ve 2021:Aralık dönemine ait aylık veri seti ile doğrusal dışılığı dikkate alan geleneksel olmayan gecikmesi dağıtılmış otoregresif modeli kullanarak incelemiştir. Uuzn dönemli ilişkiyi tespit etmek üzere kurulan para talebi modelinde bağımlı değişken olan reel para talebinin göstergesi olarak M1 kullanılırken açıklayıcı değişkenler olarak reel özel tüketim harcamaları, TL mevduatları için uygulanan ağırlıklı ortalama faiz oranı ve döviz kuru kullanılmıştır. Doğrusal dışılık dikkate alındığında söz konusu dönem için tahmin edilen para talebi fonksiyonuna ait katsayıların istikrarlı olduğu CUSUM ve CUSUMQ testleri ile tespit edilmiştir. Geleneksel gecikmesi dağıtılmış otoregresif model ile tahmin yapıldığında para talebi ile para talebinin belirleyicileri arasında uzun dönemli ilişkinin var olmadığı gözlemlenmişken doğrusal dışılığı dikkate alan geleneksel olmayan modein tahmin edilmesiyle para talebi ile para talebinin belirliyecileri arasında uzun dönemli ilişki tespit edilmiştir.

References

  • Albulescu, C. T., Pépin, D. (2018), “Monetary Integration, Money-Demand Stability, and the Role of Monetary Overhang in Forecasting Inflation in CEE Countries”, Journal of Economic Integration, 33(4): 841-879.
  • Akıncı, Ö. (2003), “Modeling the Demand for Currency Issued in Turkey”, Central Bank Review, 3(1).
  • Algan, N., Gencer, S. (2011), “Türkiye’de Para Talebi Fonksiyonunun Modellenmesi”, Çukurova Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 20(1): 195-211.
  • Arango, S., Nadiri, M. I. (1981), “Demand for Money in Open Economies”, Journal of Monetary Economics, 7: 69-83.
  • Avouyi-Dovi, S., Drumetz, F., and Sahuc, J-G. (2012), “The Money Demand Function for the Euro Area: Some Empirical Evidence”, Bulletin of Economic Research, 64(3): 377-392.
  • Bae, Y., Kakkar, V., and Ogaki, M. (2006), “Money Demand in JAPAN and Nonlinear Cointegration”, Journal of Money, Credit and Banking, 38(6): 1659-1667.
  • Bahmani-Oskooee, M. Karacal, M. (2006), “The Demand for Money in Turkey and Currency Substitution”, Applied Economics Letters, 13(10): 635-642.
  • Bahmani-Oskooee, M., Nayeri, M. M. (2020), “Policy Uncertainty and Demand for Money in Japan”, Review of Economic Analysis, 12: 73-87.
  • Benchimol, J., Qureshi, I. (2019), “Time-Varying Money Demand and Real Balance Effects”, Globalization Institute WP 364 Fed Dallas, https://doi.org/10.24149/gwp364 (25.08.2022)
  • Brand, C., Cassola, N. (2004), “A Money Demand System for Euro Area M3”, Applied Economics, 36(8): 817-838.
  • Choi, W. G. and Cook, D. (2007). “Financial Market Risk and US Money Demand”, IMF WP 07/89. https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Financial-Market-Risk-and-U-S-20643 (01.09.2022)
  • Dedeoglu, D., Ogut, K. (2018), “Examination of Money Supply Endogeneity in Turkey: Evidence from asymmetric causality test”, Cogent Economics & Finance, 6(1).
  • Dickey, D. A., Fuller, W. A. (1979). “Distribution of the Estimators for Autoregressive Time Series with a Unit Root.” Journal of American Statistical Association, 74(306): 427–431.
  • Dreger, C., Wolters, J. (2010), “Investigating M3 Money Demand in the Euro Area”, Journal of International Money and Finance, 29: 111-122.
  • Friedman, M. (1956), “The Quantity Theory of Money: A Restatement”, In: Friedman, M., Ed., The Optimum Quantity of Money, Aldine Publishing Company, Chicago, 3-41.
  • Hafer, R. W., Jansen, D. W. (1991), “The Demand for Money in the US: Evidence from cointegration tests”, Journal of money, Credit and Banking, 23(2): 155-168.
  • Kurihara, Y. (2016), “Demand for Money Under Low Interest Rates in Japan”, Journal of Economics and Financial Studies, 4(4): 12-19.
  • Lucas, R.E. (1988), “Money Demand in the United States: A quantitative review”, Carnegie-Rochester Conference Series on Public Policy, 29: 137–168.
  • Lütkepohl, H. (1993), “The Sources of the US Money Demand Instability”, Empirical Economics, 18: 729-743.
  • Meltzer, A. H. (1963), “The Demand for Money: The Evidence from the Time Series”, Journal of Political Economy, 71(3): 219-246.
  • Mundell, R. A. (1963), “Capital Mobility and Stabilization Policy Under Fixed and Flexible Exchange Rates”, The Canadian Journal of Economics and Political Science, 29(4): 475-485.
  • Özcan, B., Arı, A. (2013), “Para Talebinin Belirleyenleri ve İstikrarı Üzerine Bir Uygulama: Türkiye Örneği”, Yönetim ve Ekonomi Dergisi, 20(2): 105-120.
  • Pérez, A.S. (2014), “Cointegration Analysis of Money Demand in the Euro Area”, https://addi.ehu.es/bitstream/handle/10810/14503/TFG_Salazar.pdf?sequence=2 (26.05.2022)
  • Pesaran, M. H., Shin, Y. (1999), “An Autoregressive Distribute Lag Modeling Approach to Cointegration Analysis”, In Strom, S., Ed., Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, Cambridge University Press.
  • Pesaran, M. H., Shin, Y., and Smith, R. J. (2001), “Bounds Testing Approaches to the Analysis of Level Relationships”, Journal of Applied Econometrics, 16: 289–326.
  • Phillips, P. C. B., Perron, P. (1988), “Testing for a Unit Root in Time Series Regression”, Biometrika,75(2): 335–346.
  • Scheiblecker, M. (2012), “Modelling Short-run Money Demand for the USA”, Austrian Institute of Economic Research WIFO Working Papers, No. 442, https://www.econstor.eu/bitstream/10419/128990/1/wp_442.pdf (15.08.2022)
  • Shin, Y., Yu, B., and Greenwood-Nimmo, M. (2014). “Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework.” Festschrift in Honor of Peter Schmidt. Springer, New York, NY.
  • Sprenkle, C. M., Miller, M. H. (1980), “The Precautionary Demand for Narrow and Broad Money”, Economica, 47(188): 407-421.
  • Tobin, J. (1956), “The Interest-Elasticity of Transactions Demand for Cash”, The Review of Economics and Studies, 38(3): 241-247.
  • Tümtürk, O. (2017), “Stability of Money Demand Function in Turkey”, Business and Economics Research Journal, 8(1): 35-48.
  • URL 1: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Core+Functions/Monetary+Policy/Central+Bank+Monetary+Policy+Framework
  • Yılancı, V. (2015), “Türkiye'de Para Talebi İstikrarlılığının Testi: Kayan Pencerelerde Sınır Testi Yaklaşımı”, Dumlupınar Üniversitesi Sosyal Bilimler Dergisi, (33): 67-74.
There are 33 citations in total.

Details

Primary Language English
Subjects Economics
Journal Section Articles
Authors

Ahmet Usta 0000-0001-9899-8072

Publication Date October 19, 2022
Published in Issue Year 2022 Volume: 6 Issue: 2

Cite

APA Usta, A. (2022). Modelling Asymmetric Cointegration of Money Demand in Türkiye: Bounds Testing Approach. Anadolu İktisat Ve İşletme Dergisi, 6(2), 87-103.