An Empirical Analysis of the Money Demand Function in Asean-5

This paper investigates the dynamic of relationship between real money balances and real income, lending rates, interest rates and inflation rate in ASEAN-5, namely Indonesia, Malaysia, Philippine, Singapore and Thailand. Using sample period for each country spans from 1987 month one through 2007 month four, the empirical results indicate that (1) cointegration technique – two step Engle Granger (1987) and error correction model (ECM) clearly show that there exists a long run relationships between real money balances and its determinants and (2) the ECM analysis has provided a support to the short-run relationships between M2 and real income, lending rates, interest rates and inflation rate for ASEAN-5