Money Demand in Jordan during the Period 1993-2013

Abstract

This study aim to estimate the stability of money demand Jordan, in terms of Gross domestic Product GDP, Inflation and Interstate during the period (1993-2013). Decide whether the banking crisis has impact on the demand for money function during the study period, using (co-integration) techniques and Error correction Model (VECM). The study came out of results that variables affecting the demand function were statistically significant at 10% degree, and the elasticity of demand for money for the sample size is equal to 2.23 meaning that real GDP rising by 10% would lead to a rise in the demand for money by 2.32%. Financial Stability results indicated the presence of significant statistical significance between GDP and interest rate therefore the improvement in economic activity is associated with increased demand for money.

Keywords: Money demand