Some Empirical Evidence on the Stability of Money Demand in Kenya

Volume: 4 Number: 4 December 1, 2014
  • Moses C. Kiptui
EN

Some Empirical Evidence on the Stability of Money Demand in Kenya

Abstract

This study examines the stability of the demand for money in Kenya owing to conflicting results derived from previous studies which have cast doubt on the relevance of monetary targeting. Bounds testing techniques are applied and an error correction model estimated. Demand for broad monetary aggregates is shown to be stable. Moreover, the real income elasticity estimates derived in the analysis are reasonably within the range expected in the Baumol-Tobin framework while the interest rate (Treasury bill rate) elasticity is in the expected range of -0.1 to -0.5. An uncertainty variable incorporated in the model is found to have positive effects on demand for broad monetary aggregates particularly M2 money demand, implying that uncertainty drives economic agents to subsequently switch to relatively liquid assets. The finding that demand for broad monetary aggregates is stable can be interpreted to mean that monetary targeting remains relevant in the Kenyan context.

Keywords

Details

Primary Language

English

Subjects

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Journal Section

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Authors

Moses C. Kiptui This is me

Publication Date

December 1, 2014

Submission Date

December 1, 2014

Acceptance Date

-

Published in Issue

Year 2014 Volume: 4 Number: 4

APA
Kiptui, M. C. (2014). Some Empirical Evidence on the Stability of Money Demand in Kenya. International Journal of Economics and Financial Issues, 4(4), 849-858. https://izlik.org/JA39GL42UA
AMA
1.Kiptui MC. Some Empirical Evidence on the Stability of Money Demand in Kenya. IJEFI. 2014;4(4):849-858. https://izlik.org/JA39GL42UA
Chicago
Kiptui, Moses C. 2014. “Some Empirical Evidence on the Stability of Money Demand in Kenya”. International Journal of Economics and Financial Issues 4 (4): 849-58. https://izlik.org/JA39GL42UA.
EndNote
Kiptui MC (December 1, 2014) Some Empirical Evidence on the Stability of Money Demand in Kenya. International Journal of Economics and Financial Issues 4 4 849–858.
IEEE
[1]M. C. Kiptui, “Some Empirical Evidence on the Stability of Money Demand in Kenya”, IJEFI, vol. 4, no. 4, pp. 849–858, Dec. 2014, [Online]. Available: https://izlik.org/JA39GL42UA
ISNAD
Kiptui, Moses C. “Some Empirical Evidence on the Stability of Money Demand in Kenya”. International Journal of Economics and Financial Issues 4/4 (December 1, 2014): 849-858. https://izlik.org/JA39GL42UA.
JAMA
1.Kiptui MC. Some Empirical Evidence on the Stability of Money Demand in Kenya. IJEFI. 2014;4:849–858.
MLA
Kiptui, Moses C. “Some Empirical Evidence on the Stability of Money Demand in Kenya”. International Journal of Economics and Financial Issues, vol. 4, no. 4, Dec. 2014, pp. 849-58, https://izlik.org/JA39GL42UA.
Vancouver
1.Moses C. Kiptui. Some Empirical Evidence on the Stability of Money Demand in Kenya. IJEFI [Internet]. 2014 Dec. 1;4(4):849-58. Available from: https://izlik.org/JA39GL42UA