Naslov
The Demand for Money in Croatia in Post Stabilization Period

Autori
Cota, Boris ; Erjavec, Nataša

Izvornik
Zagreb Journal of Economics (1331-4599) 5 (2001), 8; 81-112

Vrsta, podvrsta i kategorija rada
Radovi u časopisima, članak, znanstveni

Ključne riječi
demand for money; stability; cointegration; vector autoregression

Sažetak
The aim of the paper is to estimate money demand functions in Croatia for M1 and M1a monetary aggregates in post stabilisation period using cointegration and error-correction methodology. Demand for money balances in Croatia was increased after introducing anti-inflation stabilisation program on October 4, 1993. Stabilisation program introduced restrictive monetary policy with liberalisation of foreign exchange market and exchange rate. Expected inflation was reduced so price level has been stable and households replaced their foreign exchange savings with domestic currency. The result was change in the money demand. Monetary aggregates M1 and M1a show very similar behaviour during the analysed period and we found stable long-run and short-run money demand functions. Money demand appears to be of a classical type in the long-run ; dominated by economic transactions. The estimated long-run interest rate elasticity for M1 and M1a is zero and income elasticity is unity. It was found out that an error-correction term is an important explanatory variable in the short-run M1 and M1a demand functions. It implies that disequilibrium in the long-run relationship makes pressure on real money growth. In the short-run model there exists a significant and negative effect of interest rate changes on money growth. That shows the importance of opportunity cost effects for the demand for narrow money and M1a in the short-run.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

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