Demand for money in Zimbabwe: 2009 - 2013

Abstract

This study estimates both narrow and broad money demand in Zimbabwe for the period 2009 to 2013. The money demand function is an important tool for macroeconomic policy analysis, especially monetary policy as it provides the relationship between money demand and macroeconomic variables. The study finds that income, interest rate and inflation are significant variables in the money demand function. The study uses the Augmented Dickey Fuller test to confirm the long-run cointegration and the Johansen approach for the error correction model. Stability tests conducted show that the narrow money demand function is stable while the broad money demand function is not stable.