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A Cointegration Analysis of Broad Money Demand in Cameroon
Author:
Mr. Jean-Claude Nachega
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Series:
IMF Working Papers
Volume/Issue:
Volume 2001: Issue 026
Language:
English
Publication Date:
01 Mar 2001
DOI:
https://doi.org/10.5089/9781451844382.001
ISBN:
9781451844382
ISSN:
1018-5941
Pages:
39
Keywords:
WP; CFA franc; broad money; rate of inflation; Cameroon; cointegration; money demand; inflation; fixed exchange rate; demand function; depreciation rate; broad money velocity; income elasticity; interest rate differential; function exhibit; correlation coefficient; opportunity cost; Demand for money; Monetary base; Income; Currencies; Sub-Saharan Africa; West Africa
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper applies cointegration analysis and error-correction modeling to investigate the behavior of broad money demand in Cameroon over 1963/64-1993/94. The cointegrated VAR analysis first describes an open-economy model of money, prices, income, and a vector of rates of return, within which three steady state relations are identified: a stable money demand function, an excess aggregate demand relationship, and the uncovered interest rate relation under fixed exchange rates and perfect capital mobility. Empirical support is thereafter provided for both PPP and the international Fisher parity between Cameroon and France, and the stability of the short-run dynamics of the broad money demand function is confirmed.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund