TITLE:
Long-Run Money Demand in Ghana: In Search of Stability
AUTHORS:
Michael Asiedu, Sabi Couscous Mouhamadou Nazirou, Soazafy Joyce Sabrina
KEYWORDS:
Money Demand, Stability, Co-Integration, CUSUM and CUSUM Squared Test, Ghana
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.9 No.4,
November
25,
2020
ABSTRACT: In this
study, we
employed annual time series data of Ghana from 1982 to 2019 to examine the
long-run money demand function and its stability. Through the methods of
co-integration, Vector Error Correction Model, Auto-regressive Distributed Lag bounds
test, CUSUM test (cumulative sum of the recursive residuals) and CUSUM sq test (cumulative sum
squared of the recursive residuals) we established total stability and long-run
relationship between money demand function and its determining factors. Accordingly,
our key recommendation is for monetary policymakers to improve on their
supervision and monitoring role in the financial market and institutions to
avert failures within the sector such as what happened beginning 2014 with the
proliferation of several Ponzi-schemes. Monitoring and supervision are key to the maintenance of
confidence and stability in the monetary system.