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Symmetric and asymmetric effects of exchange rates on money demand: Empirical evidence from Vietnam?

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  • Sy-Hoa Ho
  • Jamel Saadaoui
Abstract
This empirical investigation aims at exploring the determinants of money demand in Vietnam by using both linear and nonlinear autoregressive distributed lags models over the period spanning from the third quarter of 2000 to the first quarter of 2018. Our findings can be summarized as follows: firstly, when the shock is symmetric (i.e. a permanent nominal appreciation of one percent), the money demand increases by 3.7 percent in the long term. Secondly, when the shock is asymmetric, for a permanent nominal appreciation of one percent, we observe an increase of 15.6 percent in the money demand. Whereas, for a permanent nominal depreciation of one percent, we observe a decrease of 7.4 percent in the money demand. These results are consistent with symmetry tests and lead us to think that asymmetries occur mainly in the short run and are transmitted to the long run.

Suggested Citation

  • Sy-Hoa Ho & Jamel Saadaoui, 2019. "Symmetric and asymmetric effects of exchange rates on money demand: Empirical evidence from Vietnam?," Working Papers of BETA 2019-49, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  • Handle: RePEc:ulp:sbbeta:2019-49
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    File URL: http://beta.u-strasbg.fr/WP/2019/2019-49.pdf
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    More about this item

    Keywords

    Money Demand; Exchange Rate; ARDL models; NARDL models; Dollarization.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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