Economic Uncertainty, Monetary Uncertainty and the Demand for Money in Asia: An Asymmetry Analysis

Abstract

The research explores the influence of both economic and monetary uncertainty on money demand in the short and long term in Asia for 1990 to 2020. The study applied linear ARDL and nonlinear ARDL approaches for estimation. The result of the study shows that more of the countries' uncertainty measures significantly affect money demand in the short run. The Linear ARDL model output shows in the short run economic and monetary uncertainty negative association with money demand except in India and Bangladesh where economic uncertainty positive link. In the long run, effects where exchange rate interest rate and both uncertainties measure negative link with money demand. But in Japan, Singapore, India, and the Philippines most of the estimator coefficients were found insignificant in long run. The results of the non-linear ARDL model show in the short run all countries significantly affect positive and negative money demand. In long run, all variables were found significant for money demand. Further, the stability test shows all variables are stable. These findings suggest that policymakers should focus on stabilizing monetary policy to control inflation and reduce uncertainty, as it directly influences money demand in various Asian economies.

The research explores the influence of both economic and monetary uncertainty on money demand in the short and long term in Asia for 1990 to 2020. The study applied linear ARDL and nonlinear ARDL approaches for estimation. The result of the study shows that more of the countries' uncertainty measures significantly affect money demand in the short run. The Linear ARDL model output shows in the short run economic and monetary uncertainty negative association with money demand except in India and Bangladesh where economic uncertainty positive link. In the long run, effects where exchange rate interest rate and both uncertainties measure negative link with money demand. But in Japan, Singapore, India, and the Philippines most of the estimator coefficients were found insignificant in long run. The results of the non-linear ARDL model show in the short run all countries significantly affect positive and negative money demand. In long run, all variables were found significant for money demand. Further, the stability test shows all variables are stable. These findings suggest that policymakers should focus on stabilizing monetary policy to control inflation and reduce uncertainty, as it directly influences money demand in various Asian economies.