BibTex RIS Cite

The Estimation of Long Run Broad Money Demand (M2Y) in Turkey : Evidence from Time Varying Parameters Approach

Year 2013, Volume: 13 Issue: 4, 515 - 526, 01.11.2013

Abstract

This paper attempts to estimate the long run money demand for Turkish economy by examining the empirical relationship among real money, real income, interest rate, inflation and exchange rate. To this end, both constant (ARDL bounds test) and a time-varying coefficients model based on Kalman filter technique are employed over the period 1989Q1-2010Q4, characterized by financial crises, high inflation and exchange rate fluctuations in Turkey. ARDL bounds test results indicate that there is a long-run relationship between real money, real income, the exchange rate, inflation and interest rate. The long run relationship is finally estimated by a time-varying parameters model. The estimation results show that both real income and exchange rate have positive effect on real money demand, whereas inflation and interest rate have a negative effect on real money demand

References

  • Akıncı, Ö. (2003) “Modeling Demand for Currency Issued in Turkey” Central Bank Review, 1:1-25.
  • Alejandro, P.V. ve Fernandez, A.F. (2008) “Trade- Growth Realtionship in Cuba: Estimation Using the Kalman Filter”Cepal Review, 94:97-116.
  • Arısoy, İ. (2013) “Testing for the Fisher Hypothesis under Regime Shifts in Turkey: New Evidence from Time-Varying Parameters” International Journal of Economics and Financial Issues 3(2):496-502
  • Bahmani-Oskooee, M. ve Brown, F. (2004) “Kalman Filter Approach to Estimate the Demand for International Reserves” Applied Economics, 36(15):1655-1668.
  • Bahmani Oskooee, M. ve Chi Wing Ng, R.(2002) “Long-Run Demand for Money in Hong Kong: An Application of the ARDL Model” International Journal of Business and Economics, (1/2):147-155
  • Bahmani-Oskooee, M. ve Karacal, M. (2006) “The Demand for Money in Turkey and Currency Substitution” Applied Economics Letters, 13:635-642.
  • Capasso, S. ve Napolitano, O. (2012) “Testing for the Stability of Money Demand in Italy: Has the Euro Influenced the Monetary Transmission Mechanism?” Applied Economics, 44(24):3121-3133.
  • Caporale, T. (1998) “The Impact of Monetary Regime Changes: Some Exchange Rate Evidence” Journal of Economic Behavior & Organization, 35:85-94.
  • Civcir, İ. (2003) “Money Demand, Financial Liberalization and Currency Substitution in Turkey” Journal of Economic Studies, 30(5):514-534.
  • Cogley, T. (1993) “Adapting to Instability in Money Demand:Forecasting Money Growth with a Time- Varying Parameter Model” FRBSF Economic Review, 3:35-41.
  • Çatık, A.N. (2007) “Yapısal Kırılma Altında Para Talebinin İstikrarı: Türkiye Örneği” İktisat, İşletme ve Finans, 22(251):103-113.
  • Dekle, R. ve Pradhan, M. (1997) “Financial Liberalization and Money Demand in ASEAN Countries: Implications for Monetary Policy” IMF Working Paper 1997/36.
  • Dotsey, M., Lantz, C.D. ve Santucci, L. (2000) “Is Money Useful in the Conduct of Monetary Policy?” Federal Reserve Bank of Richmond Economic Quarterly, 86(4):23-48.
  • Engle, R. ve Granger, C. (1987) “Cointegration and Error Correction: Representation, Estimation and Testing” Econometrica, 55:251-276.
  • Elliott, G., Rothenberg, T. J. ve Stock, J. H. (1996), “Efficient Tests for an Autoregressive Unit Root” Econometrica, 64, 813-836.
  • Ericsson, N.R. (1998) “Empirical Modelling of Money Demand” Empirical Economics, 23:295-315.
  • Gilal, M.A. (2011) “Exchange Market Pressure and Monetary Policy: A Case Study of Pakistan” Unpublished PhD thesis, University of Glasgow.
  • Halıcıoğlu, F. ve Uğur, M. (2005) “On Stability of the Demand for Money in a Developing OECD Country: The Case of Turkey” Global Business and Economic Review, 7 (2/3): 203-213.
  • Harvey, A.C. (1990Forecasting, Structural Time Series Models and the Kalman Filter, Cambridge University Press.
  • Johansen, S. ve Juselius, K. (1990) “Maximum Likelihood Estimation and Inference on Cointegration with Applications to the Demand for Money” Oxford Bulletin of Economics and Statistics, 52(2):169-209.
  • Judd, J.P. ve Scadding, J.L. (1982) “The Search for a Stable Money Demand Function: A Survey of the Post-1973 Literature” Journal of Economic Literature, 20(3):993-1023.
  • Koğar, Ç.İ. (1995) “Cointegration Test for Money Demand: the Case for Turkey and Israel” The Central Bank of the Republic of Turkey, Research Department Discussion Paper No:9514.
  • Kwiatkowski, D., Phillips, P.C.B., Schmidt, P. ve Shin, Y. (1992) “Testing The Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That the Economic Time Series Have a Unit Root?”Journal of Econometrics, 54:159-178.
  • Lee, J. ve Strazicich, M.C. (2003) “Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks”The Review of Economics and Statistics, 85(4):1082- 1089.
  • Lucas R.E. (1976) “Econometric Policy Evaluation: A Critique” in Brunner, K.ve Meltzer, A. The Phillips Curve and Labor Markets, Carnegie-Rochester Series on Public Policy, Journal of Monetary Economics, 1:19-46.
  • Miller, S.M. (1991)“Monetary Dynamics: An Application of Cointegration and Error Correction Modelling” Journal of Money, Credit and Banking, 23(2):139-154.
  • Mutluer, D. ve Barlas, Y. (2002) “Modeling the Turkish Broad Money Demand” Central Bank Review, 2:55-75.
  • Pesaran, M.H., Shin, Y. ve Smith, R.J. (2001) “Bounds Testing Approaches to the Analysis of Level Relationships” Journal of Applied Econometrics, 16(3):289-326.
  • Pradhan, B.K., Subramanian, A. (2003) “On Demand for M2 in Malaysia” Journal Asian Economics, 13:337-356 the Stability of Demand for Money in a Developing Economy: Some Empirical Issues”, Journal of Development Economics, 72:335-351.
  • Ramajo, J. (2001) “Time-Varying Parameter Error Correction Models: The Demand for Money in Venezuela, 1983.I-1994.IV” Applied Economics, 33(6):771-782.
  • Saatçioğlu, C. ve Korap, H.L. (2005) “The Turkish Broad Money Demand” İstanbul Ticaret Üniversitesi Sosyal Bilimler Dergisi, 7(1):139-165
  • Sriram, S.S. (1999) “Survey of Literature on Demand for Money: Theoretical and Empirical Work with Special Reference to Error-Correction Models” IMF Working Paper Series, No:99/64
  • Sriram, S.S. (2001) “A Survey of Recent Empirical Money Demand Studies” IMF Staff Papers, No:3.
  • Sriram, S.S. (2002) “Determinants and Stability of
  • Stracca, L. (2001) “The Functional Form of the Demand for Euro Area M1” European Central Bank, Working Paper No:51
  • Vega, J.L. (1998) “Money Demand Stability:Evidence from Spain” Empirical Economics, 23:387-400
  • Yamak, R. (1996) “Türkiye’nin Laffer Eğrisi: Kalman Filtre Tahmin Tekniği”, Ekonomik Yaklaşım, 7(21):27-38.
  • Yamak, R. ve Abdioğlu, Z. (2010) “Thirlwall Yasa- sı: Türkiye Örneği, 1982-2008” Ege Akademik Bakış, 10(2):443-463.

Türkiye’de Uzun Dönem Geniş (M2Y) Para Talebinin Tahmini: Zamana Göre Değişen Katsayılar Yönteminden Bulgular

Year 2013, Volume: 13 Issue: 4, 515 - 526, 01.11.2013

Abstract

Bu çalışmada reel para talebinin, reel gelir, faiz oranı, enflasyon ve döviz kuru değişkenleri ile etkileşimleri ampirik olarak incelenmek suretiyle Türkiye ekonomisi için 1989Q1-2010Q4 döneminde uzun dönem reel para talebi fonksiyonu tahmin edilmeye çalışılmıştır. Analiz dönemi içerisinde Türkiye ekonomisinde gözlenen finansal krizler, yüksek enflasyon ve döviz kuru dalgalanmaları dikkate alınarak reel para talebi fonksiyonunun tahmininde geleneksel sabit katsayılı (ARDL Sınır Testi) tahmin yönteminin yanı sıra Kalman Filtre Tekniğine dayalı Zamanla Değişen Katsayılar modelinden yararlanılmıştır. İlk aşamada gerçekleştirilen sabit katsayılı ARDL Sınır Testi sonuçları reel para talebi ile reel gelir, faiz oranı, enflasyon ve döviz kuru değişkenleri arasında uzun dönemli bir ilişkinin varlığına işaret etmiştir. Değişkenler arasında saptanan bu uzun dönem ilişkisine dayanarak uzun dönem reel para talebi fonksiyonu ikinci aşamada zamanla değişen katsayılar yöntemi ile tahmin edilmiştir. Sonuçlar uzun dönemde reel para talebinin faiz ve enflasyondaki değişimlerden negatif, reel gelir ve döviz kurundaki değişimlerden ise pozitif yönde etkilendiğini göstermektedir

References

  • Akıncı, Ö. (2003) “Modeling Demand for Currency Issued in Turkey” Central Bank Review, 1:1-25.
  • Alejandro, P.V. ve Fernandez, A.F. (2008) “Trade- Growth Realtionship in Cuba: Estimation Using the Kalman Filter”Cepal Review, 94:97-116.
  • Arısoy, İ. (2013) “Testing for the Fisher Hypothesis under Regime Shifts in Turkey: New Evidence from Time-Varying Parameters” International Journal of Economics and Financial Issues 3(2):496-502
  • Bahmani-Oskooee, M. ve Brown, F. (2004) “Kalman Filter Approach to Estimate the Demand for International Reserves” Applied Economics, 36(15):1655-1668.
  • Bahmani Oskooee, M. ve Chi Wing Ng, R.(2002) “Long-Run Demand for Money in Hong Kong: An Application of the ARDL Model” International Journal of Business and Economics, (1/2):147-155
  • Bahmani-Oskooee, M. ve Karacal, M. (2006) “The Demand for Money in Turkey and Currency Substitution” Applied Economics Letters, 13:635-642.
  • Capasso, S. ve Napolitano, O. (2012) “Testing for the Stability of Money Demand in Italy: Has the Euro Influenced the Monetary Transmission Mechanism?” Applied Economics, 44(24):3121-3133.
  • Caporale, T. (1998) “The Impact of Monetary Regime Changes: Some Exchange Rate Evidence” Journal of Economic Behavior & Organization, 35:85-94.
  • Civcir, İ. (2003) “Money Demand, Financial Liberalization and Currency Substitution in Turkey” Journal of Economic Studies, 30(5):514-534.
  • Cogley, T. (1993) “Adapting to Instability in Money Demand:Forecasting Money Growth with a Time- Varying Parameter Model” FRBSF Economic Review, 3:35-41.
  • Çatık, A.N. (2007) “Yapısal Kırılma Altında Para Talebinin İstikrarı: Türkiye Örneği” İktisat, İşletme ve Finans, 22(251):103-113.
  • Dekle, R. ve Pradhan, M. (1997) “Financial Liberalization and Money Demand in ASEAN Countries: Implications for Monetary Policy” IMF Working Paper 1997/36.
  • Dotsey, M., Lantz, C.D. ve Santucci, L. (2000) “Is Money Useful in the Conduct of Monetary Policy?” Federal Reserve Bank of Richmond Economic Quarterly, 86(4):23-48.
  • Engle, R. ve Granger, C. (1987) “Cointegration and Error Correction: Representation, Estimation and Testing” Econometrica, 55:251-276.
  • Elliott, G., Rothenberg, T. J. ve Stock, J. H. (1996), “Efficient Tests for an Autoregressive Unit Root” Econometrica, 64, 813-836.
  • Ericsson, N.R. (1998) “Empirical Modelling of Money Demand” Empirical Economics, 23:295-315.
  • Gilal, M.A. (2011) “Exchange Market Pressure and Monetary Policy: A Case Study of Pakistan” Unpublished PhD thesis, University of Glasgow.
  • Halıcıoğlu, F. ve Uğur, M. (2005) “On Stability of the Demand for Money in a Developing OECD Country: The Case of Turkey” Global Business and Economic Review, 7 (2/3): 203-213.
  • Harvey, A.C. (1990Forecasting, Structural Time Series Models and the Kalman Filter, Cambridge University Press.
  • Johansen, S. ve Juselius, K. (1990) “Maximum Likelihood Estimation and Inference on Cointegration with Applications to the Demand for Money” Oxford Bulletin of Economics and Statistics, 52(2):169-209.
  • Judd, J.P. ve Scadding, J.L. (1982) “The Search for a Stable Money Demand Function: A Survey of the Post-1973 Literature” Journal of Economic Literature, 20(3):993-1023.
  • Koğar, Ç.İ. (1995) “Cointegration Test for Money Demand: the Case for Turkey and Israel” The Central Bank of the Republic of Turkey, Research Department Discussion Paper No:9514.
  • Kwiatkowski, D., Phillips, P.C.B., Schmidt, P. ve Shin, Y. (1992) “Testing The Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That the Economic Time Series Have a Unit Root?”Journal of Econometrics, 54:159-178.
  • Lee, J. ve Strazicich, M.C. (2003) “Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks”The Review of Economics and Statistics, 85(4):1082- 1089.
  • Lucas R.E. (1976) “Econometric Policy Evaluation: A Critique” in Brunner, K.ve Meltzer, A. The Phillips Curve and Labor Markets, Carnegie-Rochester Series on Public Policy, Journal of Monetary Economics, 1:19-46.
  • Miller, S.M. (1991)“Monetary Dynamics: An Application of Cointegration and Error Correction Modelling” Journal of Money, Credit and Banking, 23(2):139-154.
  • Mutluer, D. ve Barlas, Y. (2002) “Modeling the Turkish Broad Money Demand” Central Bank Review, 2:55-75.
  • Pesaran, M.H., Shin, Y. ve Smith, R.J. (2001) “Bounds Testing Approaches to the Analysis of Level Relationships” Journal of Applied Econometrics, 16(3):289-326.
  • Pradhan, B.K., Subramanian, A. (2003) “On Demand for M2 in Malaysia” Journal Asian Economics, 13:337-356 the Stability of Demand for Money in a Developing Economy: Some Empirical Issues”, Journal of Development Economics, 72:335-351.
  • Ramajo, J. (2001) “Time-Varying Parameter Error Correction Models: The Demand for Money in Venezuela, 1983.I-1994.IV” Applied Economics, 33(6):771-782.
  • Saatçioğlu, C. ve Korap, H.L. (2005) “The Turkish Broad Money Demand” İstanbul Ticaret Üniversitesi Sosyal Bilimler Dergisi, 7(1):139-165
  • Sriram, S.S. (1999) “Survey of Literature on Demand for Money: Theoretical and Empirical Work with Special Reference to Error-Correction Models” IMF Working Paper Series, No:99/64
  • Sriram, S.S. (2001) “A Survey of Recent Empirical Money Demand Studies” IMF Staff Papers, No:3.
  • Sriram, S.S. (2002) “Determinants and Stability of
  • Stracca, L. (2001) “The Functional Form of the Demand for Euro Area M1” European Central Bank, Working Paper No:51
  • Vega, J.L. (1998) “Money Demand Stability:Evidence from Spain” Empirical Economics, 23:387-400
  • Yamak, R. (1996) “Türkiye’nin Laffer Eğrisi: Kalman Filtre Tahmin Tekniği”, Ekonomik Yaklaşım, 7(21):27-38.
  • Yamak, R. ve Abdioğlu, Z. (2010) “Thirlwall Yasa- sı: Türkiye Örneği, 1982-2008” Ege Akademik Bakış, 10(2):443-463.
There are 38 citations in total.

Details

Other ID JA74NH84HE
Journal Section Research Article
Authors

Salih Gencer This is me

İbrahim Arısoy This is me

Publication Date November 1, 2013
Published in Issue Year 2013 Volume: 13 Issue: 4

Cite

APA Gencer, S., & Arısoy, İ. (2013). The Estimation of Long Run Broad Money Demand (M2Y) in Turkey : Evidence from Time Varying Parameters Approach. Ege Academic Review, 13(4), 515-526.
AMA Gencer S, Arısoy İ. The Estimation of Long Run Broad Money Demand (M2Y) in Turkey : Evidence from Time Varying Parameters Approach. ear. November 2013;13(4):515-526.
Chicago Gencer, Salih, and İbrahim Arısoy. “The Estimation of Long Run Broad Money Demand (M2Y) in Turkey : Evidence from Time Varying Parameters Approach”. Ege Academic Review 13, no. 4 (November 2013): 515-26.
EndNote Gencer S, Arısoy İ (November 1, 2013) The Estimation of Long Run Broad Money Demand (M2Y) in Turkey : Evidence from Time Varying Parameters Approach. Ege Academic Review 13 4 515–526.
IEEE S. Gencer and İ. Arısoy, “The Estimation of Long Run Broad Money Demand (M2Y) in Turkey : Evidence from Time Varying Parameters Approach”, ear, vol. 13, no. 4, pp. 515–526, 2013.
ISNAD Gencer, Salih - Arısoy, İbrahim. “The Estimation of Long Run Broad Money Demand (M2Y) in Turkey : Evidence from Time Varying Parameters Approach”. Ege Academic Review 13/4 (November 2013), 515-526.
JAMA Gencer S, Arısoy İ. The Estimation of Long Run Broad Money Demand (M2Y) in Turkey : Evidence from Time Varying Parameters Approach. ear. 2013;13:515–526.
MLA Gencer, Salih and İbrahim Arısoy. “The Estimation of Long Run Broad Money Demand (M2Y) in Turkey : Evidence from Time Varying Parameters Approach”. Ege Academic Review, vol. 13, no. 4, 2013, pp. 515-26.
Vancouver Gencer S, Arısoy İ. The Estimation of Long Run Broad Money Demand (M2Y) in Turkey : Evidence from Time Varying Parameters Approach. ear. 2013;13(4):515-26.