Does financial liberalisation boost money demand? Evidence from Sri Lanka

Ramesh Paudel, Nelson Perera

    Research output: Contribution to journalArticle

    Abstract

    This paper examines the role of financial liberalization on money demand in Sri Lanka covering the duration over 1963 to 2008. Taking the structural break into consideration, it is detected that financial liberalization does not have such a strong positive association with money demand as suggested by McKinnon-Shaw hypothesis; rather it is negative in both long-run and short-run. However, we found strong evidence that the exchange rate and interest rate reform initiated in 1977 has a substantial contribution to expand both narrow and broad money demand.
    Original languageEnglish
    Pages (from-to)223-242
    JournalIndian Journal of Economics and Business
    Volume12
    Issue number2-4
    Publication statusPublished - 2013

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