Do recent declining money growth rates affect the stability of money demand for the Saudi economy ?

Abstract EN

This paper examines the relationship between long-run money demand function and money growth rates in Saudi Arabia.

It considers structural break in 2015 which created negative effect on money growth rates in Saudi economy.

By applying stability tests, the paper reveals that the recent money falls do not exhibit a break, leading to stability of demand for money, although there are break dates in money aggregates.

In addition, money declines do not lead to noteworthy liquidity lack.

Policymakers can achieve macroeconomic stability by considering money supply as an effective tool for long-run adjustment.