Publication:
Money Demand in the Arab Republic of Egypt: A Vector Equilibrium Correction Model

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dc.contributor.authorRostom, Ahmed
dc.date.accessioned2016-06-13T22:17:34Z
dc.date.available2016-06-13T22:17:34Z
dc.date.issued2016-05
dc.description.abstractMoney demand is critical for defining monetary policy options and is not driven necessarily by developed country standards of transaction demand, speculation motive, and opportunity costs grounded by fully functioning financial markets. However, market imperfections in less developed economies can also play a critical role in the dynamics of demand for money. This paper estimates a vector equilibrium correction model to investigate the nature of short-term and long-term interactions for money demand in the Arab Republic of Egypt. The paper concludes that real money demand in Egypt during (1958-2013) is stable and can be considered confidently by monetary authorities to adjust for long-term growth in the real economy. The rate of devaluation of the official exchange rate and inflation have a serious effect on the public's trust in the national currency in the long term. Money is not neutral for long-term portfolio decisions, because of the increase in real income in the economy that couples with an uptrend in monetization as the ratio of money stock over output also uptrends. The paper also provides quantitative evidence that the devaluation within the parallel market is negatively related to the change in demand for real money balances in the short term. Economic agents hold more domestic currency if the official exchange rate slides, and arbitrage opportunities are sought in the parallel market.en
dc.identifierhttp://documents.worldbank.org/curated/en/2016/05/26379177/money-demand-arab-republic-egypt-vector-equilibrium-correction-model
dc.identifier.doi10.1596/1813-9450-7679
dc.identifier.urihttps://hdl.handle.net/10986/24517
dc.languageEnglish
dc.language.isoen_US
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 7679
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectARBITRAGE OPPORTUNITIES
dc.subjectBANKING
dc.subjectEXCHANGE RATES
dc.subjectFINANCIAL LIBERALIZATION
dc.subjectFINANCIAL MARKETS
dc.subjectMONETARY POLICY
dc.subjectMONEY DEMAND
dc.titleMoney Demand in the Arab Republic of Egypten
dc.title.subtitleA Vector Equilibrium Correction Modelen
dc.typeWorking Paperen
dc.typeDocument de travailfr
dc.typeDocumento de trabajoes
dspace.entity.typePublication
okr.crossref.titleMoney Demand in the Arab Republic of Egypt: A Vector Equilibrium Correction Model
okr.date.disclosure2016-05-18
okr.doctypePublications & Research
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://documents.worldbank.org/curated/en/2016/05/26379177/money-demand-arab-republic-egypt-vector-equilibrium-correction-model
okr.guid614051468197933723
okr.identifier.doi10.1596/1813-9450-7679
okr.identifier.externaldocumentum090224b08433ec27_1_0
okr.identifier.internaldocumentum26379177
okr.identifier.reportWPS7679
okr.importedtrue
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2016/05/18/090224b08433ec27/1_0/Rendered/PDF/Money0demand0i0um0correction0model0.pdfen
okr.region.administrativeMiddle East and North Africa
okr.region.countryEgypt, Arab Republic of
okr.topicMacroeconomics and Economic Growth::Fiscal & Monetary Policy
okr.topicMacroeconomics and Economic Growth::Economic Theory & Research
okr.topicFinance and Financial Sector Development::Currencies and Exchange Rates
okr.topicFinance and Financial Sector Development::Capital Markets and Capital Flows
okr.unitFinance and Markets Global Practice Group
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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