Are Stock Prices and the Turkish Money Demand Function Related?-Reference-Cited by-同舟云学术

Are Stock Prices and the Turkish Money Demand Function Related?

Published:2023-07-26 Issue:57 Volume:31 Page:157-177
ISSN:1305-5577
Container-title:Sosyoekonomi
language:
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Author:

ABDUL-RAHMAN Mutawakil¹^ORCID,SEİDU Ayatullahi¹^ORCID

Affiliation:

1. IBN HALDUN UNIVERSITY

Abstract

Using the Autoregressive Distributed Lag (ARDL) and Granger causality test, this study demonstrates that M1 and M2 money demand cointegrates with real income, deposit interest rate, real exchange rates, and real stock prices. Real income, deposit interest, and exchange rates are significant determinants of the Turkish economy’s long-run M1 and M2 money demand. Furthermore, our findings reveal that the wealth effect of real stock prices outweighs the substitution effect within the Turkish economy. The impact of real stock prices on M1 and M2 money demand is positive and statistically significant in the long run. While M2 is more responsive to changes in real stock prices, M1 exhibits greater stability than M2. Therefore, policymakers must recognise the significant role of the stock market in the long-run money demand function within the Turkish economy and its impact on the effective implementation of monetary policy.

Publisher

Sosyoekonomi

Subject

Immunology and Allergy

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