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Vol 6, No 1 :

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An Ardl Model to Investigate the Money Demand (M2) in Pakistan
Zahid Iqbal , Waqas Mehmood
Abstract

This paper estimated the money demand (M2) in Pakistan by application of Auto Regressive Distributed Lag (ARDL) approach. In our analysis we found a long-run relationship between real income, real money demand, inflation, nominal interest rate, and nominal exchange rate. Real income elasticity coefficient is positive and significant, while coefficient of exchange rate is also positive but insignificant. Inflation rate and interest rate negatively effects real money demand (M2). However, inflation rate is significant variable in our study while interest rate is not. We also checked the stability of demand for money function (M2) by CUSUM and CUSMSQ tests and found that M2 demand for money is stable for Pakistan between1960-2018.
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ISSN(P) 2350-0174

ISSN(O) 2456-2378

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