Money demand and black market exchange rate: a cointegration approach with structural break
by Mouyad Al Samara; Charfeddine Lanouar; Zouhair Mrabet
Afro-Asian J. of Finance and Accounting (AAJFA), Vol. 7, No. 2, 2017

Abstract: This paper examines different specifications of the money demand function by including both black market exchange rate and oil prices as additional variables in Syria for the period 1990Q1-2009Q4. In order to test the stability of the proposed money demand function specifications, we apply the cointegration approach with structural breaks. The empirical results provide strong evidence for the existence of a stable long run relationship with shift in the cointegration vector. In particular, we found that 28% of the money demand adjustment, following a short-run shock, occurs in the following period. Moreover, the results show that the two additional variables, black market exchange rate and the oil price, play a vital role in determining the money demand in Syria.

Online publication date: Sun, 21-May-2017

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