Empirical Analysis of Demand for Real Money Balances in Africa

Panel Evidence from Nigeria and Ghana

Bibliographic Data

ID12837592
AuthorsChigozie Nelson Nkalu (0000-0002-7861-8527, University of Nigeria, corresponding author)
Year2020
Volume19
Issue4
Pages363-376
Publication date2020-10-20
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueAfrican and Asian Studies (JOURNAL)
Journal identifiersISSN: 1569-2094 • E-ISSN: 1569-2108
PublisherBrill (PUBLISHER • NL)
DOI10.1163/15692108-12341461
OpenAlexW3093933233
LanguageEN
Citations received1
References cited5

This study investigates demand for real money balances in Africa using panel time-series data from Nigeria and Ghana between 1970 and 2014. The study employs Levin, Lin, Chu common unit root process and Pedroni Residual Cointegration Test which the results reveal that all the variables in the model are stationary and cointegrated respectively. Data sourced from the World Development Indicators ( WDI ) were analyzed using Panel Two-Stage Estimated Generalized Least Squares (cross-section Seemingly Unrelated Regression model ( SURE )) with Instrumental Variables ( IV ). The results conform to the liquidity preference theory, with all the variables – inflation, real interest rates, and official exchange rates are statistically significant except real income. It is recommended that the monetary authorities in Africa especially the economies of Nigeria and Ghana should adopt appropriate monetary policies by placing interest rates, inflation and official exchange rates at acceptable levels to boost income through private sector investments

Broad money · Cointegration · Demand for money · Econometrics · Economics · Exchange rate · Inflation (cosmology · Interest rate · Macroeconomics · Market liquidity · Monetary policy · Panel data · Real interest rate · Unit root · Unit root test · Energy, Environment, and Transportation Policies · Fiscal Policy and Economic Growth · Monetary Policy and Economic Impact

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Open DOIOpen Access