Measuring the stability of money demand in Yemen : empirical study over (1990-2005)‎ period

Abstract EN

Instability in the demand for money is said to be due to many factors such as financial innovation, deregulation of the financial markets, a change in an exchange rate regime, a sudden jump in oil prices, and currency substitution due to rapid depreciation of a currency under floating exchange rate system.

In this study we use quarterly data from Yemen over (1990-2005) period and CUSUM and CUSUMQ tests combined with the Johansen's co-integration technique and error correction model to show that the demand for money is unstable in Yemen.