Estimation of Money Demand Function in Iran Including Households Religious Costs: A NARDL Approach

Document Type : Original Article

Authors

1 Ph.D. Student in economics, Department of Economics, College of Humanities and Social Sciences, Zanjan Branch, Islamic Azad University, Zanjan, Iran.

2 Professor of Economics, Department of Economics, Faculty of Economic and Political Sciences, Shahid Beheshti University, Tehran, Iran. (Corresponding Author)

3 Associate Professor of Economics, Department of Economics, College of Humanities and Social Sciences, Zanjan Branch, Islamic Azad University, Zanjan, Iran.

4 Assistant Professor of Economics, Department of Economics, College of Humanities and Social Sciences, Zanjan Branch, Islamic Azad University, Zanjan, Iran.

Abstract

Money demand determinants vary in every economy. There are many studies about Iran money demand function, which employed different variables and estimation methods. In this study, broad money (M2) is dependent variable and GDP, interest rate, exchange rate and household religious costs are descriptive variables. Household religious costs (urban and rural) are included in Iran money demand function as a religious factor because of Iran Islamic-based economy. We used NARDL method with quarterly data between 1376 and 1396, to determine if household religious costs have symmetric or asymmetric effects on Iran money demand. Bound testing approach shows a cointegration between variables, hence, we can interpret the long-run coefficients. Results show that all explanatory variables are statistically significant. Estimated coefficients of GDP, interest rate and exchange rate are 0.82, 0.01 and -0.17, respectively. Household religious costs show asymmetric effects, where estimated coefficients of negative and positive changes in household religious costs are -0.37 and 0.31, respectively.

Keywords

References

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International Journal of Finance & Managerial Accounting
Volume 4, Issue 15
October 2019
Pages 127-132

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