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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Short-run demand for money in Nigeria: a theoretical observation
Author:Afolabi, J. Ade
Year:1987
Periodical:The Nigerian Journal of Economic and Social Studies
Volume:29
Issue:2
Pages:247-254
Language:English
Geographic term:Nigeria
Subject:money demand
Abstract:The first part of this paper shows some theoretical implications of assuming a real-adjustment mechanism in the study of the short-run demand for money in Nigeria and also the misspecification that inevitably follows. The section goes on to consider the nominal adjustment form which seems to be more plausible and consistent with rational behaviour. As a by-product of the nominal-adjustment form, the third part shows how the adoption of the real-adjustment scheme in combination with the adaptive expectation hypothesis with respect to inflation term may produce a misspecification error in the form of an omitted variable. Furthermore, the section splits the short-run effect of the current inflation term on money demand into two components. The first arises from the independent role of inflation with respect to money demand and the second from the lagged adjustment of nominal balances with respect to changes in the price level. This implies that the employment of the real-adjustment framework may produce an exaggeration of the independent role of inflation with respect to money demand. Bibliogr., notes, ref.
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