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Ibrahim N Ouattara and Balakissa Kone
''The effect of exchange rate on the money demand: evidence from ECOWAS countries''
( 2023, Vol. 43 No.4 )
This paper investigates the effects of exchange rate on the demand for money in ECOWAS countries by applying panel (auto-regressive distributed lag) ARDL approach. The results reveal existence of currency substitution. We find that real effective exchange rate has positive long-run effects on the demand for money, suggesting that the expectation effect dominates the wealth effect; real effective exchange rate has negative effects in the short-run implying that the wealth effect dominates the expectation effect. When we use nominal effective exchange rate as alternative of real exchange rate, our results remain similar.
Keywords: Money Demand, Exchange rate, ECOWAS, Currency substitution, Panel ARDL
JEL: E4 - Money and Interest Rates: General
C1 - Econometric and Statistical Methods: General
Manuscript Received : Jan 29 2023 Manuscript Accepted : Dec 30 2023

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