Effect of Economic Stability on Demand for Money in Iran (1973‐2008)

Subject Areas : Applied Economics

رویا  آل عمران ¹ (مسئول مکاتبات)
فهیمه  نصراله ² (ندارد)
سیدعلی  آل عمران ³ (ندارد)

Received: 2011-05-04 Accepted : 2011-06-07 Published : 2010-12-22

Keywords: Money demand factor, economic instability, economic stability&#x0D, &#x0D, index, ARCH/GARCH, ARDL,

Abstract :

In this survey, we study the impact of the economic stability on demandfor money in Iran. We use ARCH‐GARCH model to introduce an EconomicStability Index (ESI), which is a weighted average of variables such as grossdomestic product (GDP), foreign exchange rate, inflation rate, long‐terminterest rate, and Stock Market Average Price Index.With the help our calculated ESI and employing the ARDL method weestimate the demand for money in Iran for the period of 1352‐1387. Theresults of our study show that the Economic Stability Index has a positiveimpact on demand for money in Iran.