Title: Money Demand Balances and Exchange Rate Policy in Pakistan: An ARDL and Non-ARDL Analysis
Authors: Zaib-un-nisa
Volume: 8
Issue: 7
Pages: 352-362
Publication Date: 2024/07/28
Abstract:
This paper investigates the impact of exchange rate changes across money demand balances in Pakistan by applying the linear and non-linear ARDL approaches. The study not only examines the impact of exchange rate changes across demand for money but also attempts to analyze whether demand for money is stable or not? For an estimation of money demand function, yearly time-series data have been used from the year 1972 to 2019. Findings of the linear ARDL model disclose that exchange rate and demand for money balances are positively and significantly associated with each other. Moreover,results of the non-linear ARDL model reveal that positive and negative exchange rate shocks have mixed effects on money demand. The results of the asymmetric test also demonstrate that exchange rate changes have symmetric effects on money demand while stability test results propose that money demand remains stable in Pakistan.