Impact of Foreign Monetary Developments on Demand for Money: Regression Estimates and Forecast Results

The empirical estimates for the money demand function reported here are based on quarterly time series for Thailand for the period 1973:1 to 1985:4. The money demand function estimated is novel in that it takes into account the potential effect of external monetary developments on domestic money demand in the open economy of Thailand. The empirical results show that foreign interest rates do play an important role in the Thailand money demand function. Hence the Thailand monetary authorities should not ignore the response of domestic money demand to external factors in formulating their stabilisation policies.