Title: On stability of the demand for money in a developing OECD country: the case of Turkey

Authors: Ferda Halicioglu, Mehmet Ugur

Addresses: Old Royal Naval College, University of Greenwich, Park Row, London SE10 9LS, UK. ' Old Royal Naval College, University of Greenwich, Park Row, London SE10 9LS, UK

Abstract: This paper empirically analyses the stability of the narrow money demand function (M1) in Turkey for the period 1950–2002. As part of the IMF sponsored stabilisation programme, Turkey has been pursuing base money targets. To ascertain whether this policy framework satisfies the necessary condition for effectiveness, we estimate and test for the stability of Turkish M1 by employing a recent single cointegration procedure proposed by Pesaran et al. (2001) along with the CUSUM and CUSUMSQ stability tests. We demonstrate that there is a stable money demand function and it could be used as an intermediate target of monetary policy in Turkey.

Keywords: cointegration; money demand; stability; Turkey; base money targets; monetary policy.

DOI: 10.1504/GBER.2005.007616

Global Business and Economics Review, 2005 Vol.7 No.2/3, pp.203 - 213

Available online: 20 Aug 2005

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