Naslov
The Stability of Money Demand in Croatia in Post Stabilization Period

Autori
Erjavec, Nataša ; Cota, Boris

Izvornik
Ekonomski pregled : mjesečnik Hrvatskog društva ekonomista Zagreb (0424-7558) 52 (2001), 9-10; 1149-1172

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

Ključne riječi
Demand for money; Stability; Cointegration; Vector autoregression

Sažetak
Stability of money demand in Croatia in the post stabilization period was analysed within vector autoregression model. The demand for money for M1 and M1a monetary aggregates were treated as demand for real balances, i.e. the functions were treated as homogenous of degree one in the level of prices. Monetary aggregates M1 and M1a showed similar behaviour during the analysed period. It was found out that a stable long-run and a short-run money demand functions exist. Money demand appeared 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 was zero and income elasticity was unity. The corresponding error-correction term was an important explanatory variable in the short-run model for both M1 and M1a. Furthermore, there was a significant and negative effect of interest rate changes on money growth (with one and three months lags), which showed the importance of opportunity cost effects for the demand for narrow money and M1a in the short run. Considering the statistical properties of the estimated models, apart from some outliers located at the end of the series, there was no serious evidence of model misspecification. The rehabilitation of the two largest regional banks and introducing the Value Added Taxes (VAT) at the beginning of 1998 had a statistically significant influence on the short-run money demand functions, although their influence according to parameter size was not large. Police and military actions during the war did not appear to be significant. On the basis of the presented results it could not be concluded that monetary policy instruments cause money demand to shift (the parameter values of the corresponding variables were not large) and the opinion was that those instruments were more market oriented.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

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