Determinants of Money Demand: Evidence from MENA

Abstract

Demand for money plays a major role in macroeconomic analysis, especially in selecting appropriate monetary policy actions. Therefore, the permanent need to search for a model of the demand for money which to be both theoretically coherent, empirically stable and robust is one of the most important issues in macroeconomic policy. In this paper, we investigate the influential factors on money demand among MENA countries during 1980-2013. The results of estimation show that inflation as a key determinant has negative and significant effect on money demand. Also, exchange rate and income play negative and positive role in explaining the changes in money demand respectively.

Keywords: Money demand function, inflation, MENA

JEL classification: C33, E31, E41