DOĞRU, Bülent Gümüşhane Üniversitesi - Iktisadi ve Idari Bilimler Fakültesi (İİBF) - İktisat Bölümü, Turkey

ANALYSIS of LONG-and SHORT-RUN BALANCE of MONEY DEMAND in TURKEY USING ARDL and VEC APPROACHES

39773

In this study we use co-integration bound test-ARDL (autoregressive distributed lag) and VECM (vector error-correction model) approaches to test money demand function of Mundel (1963), including exchange rate, for Turkey. The aim of the study is to find out short term stability level of M2, and examine if M2 is cointegrated with income, interest rate and exchange rate in long term. Our study covers yearly data between 1970 and 2010. Empiric results indicate that M2 is co-integrated with income, interest rate and exchange rate. In other words, linear combination of these variables converges to an equilibrium point in long- term. However, in short-term money demand function in Turkey has a significant and negative relationship with deposit interest rates.

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M2 , ARDL , VECM , Co , Integration , Turkish Economy , Money demand

The International Journal Of Economic and Social Research

31