Abstract
This paper shows that there exists a long-run equilibrium relationship between M2 and its determinants, real income and the long-term interest rate, in Korea by using Johansen and Juselius maximum likelihood cointegration method. However, M1 does not have any meaningful cointegration relationships with its determinants. The long-term interest rate is a better proxy than the short-term rate to measure the opportunity cost of holding money. Based on the results, a broad definition of money is a better measure than a narrow definition of money in considering the long-run economic impacts of changes in monetary policy in Korea.
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Hwang, JK. The demand for money in korea: Evidence from the cointegration test. International Advances in Economic Research 8, 188–195 (2002). https://doi.org/10.1007/BF02297956
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DOI: https://doi.org/10.1007/BF02297956