EFFECTS OF STOCK MARKET VOLATILITY ON DEMAND FOR MONEY AND ITS VELOCITY IN IRAN

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NASR ELAHI KH.; SAMADI SAEID; NAJIBI ASHKZARI MOHAMMAD ALI

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Journal: JOURNAL OF SUSTAINABLE GROWTH AND DEVELOPMENT (THE ECONOMIC RESEARCH) Year:2009 | Volume:9 | Issue:2 Page(s): 123-144

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Title

EFFECTS OF STOCK MARKET VOLATILITY ON DEMAND FOR MONEY AND ITS VELOCITY IN IRAN

Author(s)

NASR ELAHI KH. | SAMADI SAEID | NAJIBI ASHKZARI MOHAMMAD ALI | Issue Writer Certificate

Keywords

MONEY MARKETQ3

DEMAND FOR MONEYQ2

VOLATILITYQ2

STOCK MARKETQ2

Abstract

Money is viewed as a cash asset with special characteristics. Like other financial assets, DEMAND FOR MONEY is a part of portfolio selection process in which individuals' wealth is allocated to among various assets based on their rates of return and risks. However, empirical settings of money demand function is important from the point of the view of monetary policy. Therefore, the specification of the determinants of money demand and its functional form are crucial.The main aim of this study is to examine the determinants of demand for and velocity of money in both theoretical and empirical aspects emphasizing the function of STOCK MARKET VOLATILITY. It is well known that during the process of economic decisions and policy making there must be numerical and exact indices to assess the effects of the relevant variables and indicators on the dependent variables. In this study, the VOLATILITY of STOCK MARKET is included in the models as a proxy for market risk. ARDL approach is employed to estimate the specified models. Moreover, the stability of the coefficients is tested using CUSUM and CUSUMSQ tests. Seasonal data are used to estimate the model. The data set is used covers the period 1992- 2007.The results of this study show that when the narrow definition of money (M1) is used in the model, there is a long run relation among the variables included in the model. The estimated coefficients of real income and inflation are statistically significant and the signs of the parameters are consistent with the theory. However, the coefficients of free market exchange rate and the VOLATILITY of STOCK MARKET are not statistically significant. The results of stability tests indicate that the estimated coefficients are stable over the period 1992 -2007.

Cites

EFFECT OF ECONOMIC STABILITY ON DEMAND FOR MONEY IN IRAN (1973‐2008)

References

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APA: Copy

NASR ELAHI, KH., SAMADI, SAEID, & NAJIBI ASHKZARI, MOHAMMAD ALI. (2009). EFFECTS OF STOCK MARKET VOLATILITY ON DEMAND FOR MONEY AND ITS VELOCITY IN IRAN. JOURNAL OF SUSTAINABLE GROWTH AND DEVELOPMENT (THE ECONOMIC RESEARCH), 9(2), 123-144. SID. https://sid.ir/paper/86535/en

Vancouver: Copy

NASR ELAHI KH., SAMADI SAEID, NAJIBI ASHKZARI MOHAMMAD ALI. EFFECTS OF STOCK MARKET VOLATILITY ON DEMAND FOR MONEY AND ITS VELOCITY IN IRAN. JOURNAL OF SUSTAINABLE GROWTH AND DEVELOPMENT (THE ECONOMIC RESEARCH)[Internet]. 2009;9(2):123-144. Available from: https://sid.ir/paper/86535/en

IEEE: Copy

KH. NASR ELAHI, SAEID SAMADI, and MOHAMMAD ALI NAJIBI ASHKZARI, “EFFECTS OF STOCK MARKET VOLATILITY ON DEMAND FOR MONEY AND ITS VELOCITY IN IRAN,” JOURNAL OF SUSTAINABLE GROWTH AND DEVELOPMENT (THE ECONOMIC RESEARCH), vol. 9, no. 2, pp. 123–144, 2009, [Online]. Available: https://sid.ir/paper/86535/en

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