Revisiting Output and Monetary Uncertainty and Money Demand in Asia

Abstract

This comprehensive study conducts a meticulous examination of the intricate dynamics governing the relationship between economic and monetary uncertainties and money demand in the Asian context, spanning the extensive timeframe from 1990 to 2023. By utilizing a comprehensive analytical methodology that encompasses both linear and non-linear ARDL models the study illuminates the various elements impacting money demand in the area. Important new information is revealed especially about how uncertainty measures affect money demand in the short term. The substantial impact that different uncertainty measures have on money demand is demonstrated by empirical data highlighting their applicability in Asias complex economic environment. However, exceptions emphasize the nuanced nature of these relationships and the need for context-specific analyses. Delving deeper into the long-term perspective, the study unravels the intricate web of determinants shaping money demand in the scrutinized Asian nations. Variables like exchange rates and interest rates, alongside economic and monetary uncertainties, emerge as pivotal factors with discernible impacts. Nevertheless, intriguing variations in the nature and magnitude of these effects manifest across different countries within the Asian region. A salient conclusion drawn from this research underscores the imperative role of policymakers in the Asian context. To maintain stability and facilitate effective monetary management, policymakers are urged to place heightened emphasis on crafting and implementing judicious monetary policies. These policies should not merely address the critical concern of inflation but also confront economic uncertainties head-on. By adeptly navigating these intricate challenges, policymakers can aspire to achieve the overarching goal of stabilizing money demand in Asia's diverse and dynamic landscape.