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Sovannroeun Samreth
''An Estimation of the Money Demand Function in Cambodia''
( 2015, Vol. 35 No.4 )
In this paper, the money demand function in Cambodia is estimated. The function that incorporates the exchange rate is adopted as the estimation equation, taking into account the phenomenon of currency substitution. The autoregressive distributed lag approach to cointegration is used as the methodology, and data from the quarterly sample period between 2002Q1 and 2007Q4 are used for the estimation. The results indicate the existence of a long-run relationship among the variables considered in the money demand function. The cumulative sum as well as the cumulative sum of squares tests on the recursive residuals support the stability of the estimated function. Moreover, the long-run estimation results show that income and inflation are significant determinants of money demand in Cambodia; however, although the estimated coefficient of the exchange rate is negative, it is not statistically significant. This statistical insignificance may be due to the coexistence of the currency substitution effect and the wealth effect on domestic money demand in Cambodia when the exchange rate fluctuates. This study provides important information on the structure of money demand function in Cambodia and can serve as a foundation for further research.
Keywords: Cambodia, Currency Substitution, Money Demand Function
E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
Manuscript Received : Jul 13 2015 Manuscript Accepted : Dec 13 2015

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