The Demand for Money

Over the past decades, researchers in monetary theory have conducted a lot of studies into the variables that enter into the money demand function and the stability of the function. Understanding the relationship between money demand and its determinants is crucial in selecting the appropriate monetary instrument to stabilize an economy. Also, the success of monetary policy depends on the degree of responsiveness of money demand to changes in the interest rate. With modern economies now engaging in international trade, there is the need to consider the exchange rate as one of the determinants of money demand in addition to income and the interest rate. This book analyses the interest elasticity of demand for money, the stability of the money demand function, the impacts of interest rate volatility and exchange rate volatility on the money demand function for emerging economies. These studies should help throw some light on these policy-related issues, and should be especially useful to the monetary authorities in developing countries. The studies will also inform researchers in monetary economics on where to redirect their research efforts.