Empirical Analysis of Demand for Real Money Balances in Africa: Panel Evidence from Nigeria and Ghana
Year: 2020
Type: article
Abstract: This study investigates demand for real money balances in Africa using panel time-series data from Nigeria and Ghana between 1970 and 2014. The study employs Levin, Lin, Chu common unit root process and Pedroni Residual Cointegration Test which the results reveal that all the variables in the model are stationary and cointegrated respectively. Data sourced from the World Development Indicators (WDI) were analyzed using Panel Two-Stage Estimated Generalized Least Squares (cross-section Seemingly Unrelated Regression model (SURE)) with Instrumental Variables (IV). The results conform to the liquidity preference theory, with all the variables – inflation, real interest rates, and official exchange rates are statistically significant except real income. It is recommended that the monetary authorities in Africa especially the economies of Nigeria and Ghana should adopt appropriate monetary policies by placing interest rates, inflation and official exchange rates at acceptable levels to boost income through private sector investments.
Source: African and Asian Studies
Author: Chigozie Nelson Nkalu
Institutions: University of Nigeria, University of Aberdeen
Language: English
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W3093933233