Money Demand in Mongolia: A Panel Data Analysis

This paper investigates if there is a significant money demand relationship in Mongolia. The data used is a panel data set covering 22 Mongolian regions over the period 1993-99. The static fixed effect, dynamic fixed effect, and the pooled mean group estimators all confirm the key role of monetary policy in stabilization and reveal that even in a transition economy as rudimentary as Mongolia, a stable money demand exists. In addition, the analysis points to an elasticity of money demand with respect to activity around 0.5, reflecting the larger role for transactions demand for money. Copyright 2002, International Monetary Fund