Effective factors on velocity of money in Iran

Transcription

1 Scienific Journal of Review (2014) 3(5) ISSN doi: /sjr.v3i Conens liss available a Sjournals Journal homepage: Original aricle Effecive facors on velociy of money in Iran N. Samadpor*, M. shahsavani, H. Solani Deparmen of Managemen, Neyriz Branch, Islamic Azad Universiy, Neyriz, Iran. *Corresponding auhor; Deparmen of Managemen, Neyriz Branch, Islamic Azad Universiy, Neyriz, Iran. A R T I C L E I N F O A B S T R A C T Aricle hisory, Received 30 April 2014 Acceped 19 May 2014 Available online 29 May 2014 Keywords, Velociy of money Co inegraion echnique Iran Invesigaing he facors affecing he velociy of money, ha plays an imporan role as a key variable in he economy. This sudy aims o invesigae he variable behavior of he velociy of money in he economy during he period of , ha evaluae he effec of imporan variables such as naional income, real exchange rae, inflaion rae, increased liquidiy coefficien, he money in he hands of individuals and oher facors over hrough he course by collecive model. Based on he resuls, here is a posiive long-run equilibrium relaionship beween velociy of money and variables such as naional income, increased liquidiy coefficien, exchange raes and inflaion raes. On he oher hand he money in he hands of individuals, privae secor deposis has a negaive impac on he velociy of money Sjournals. All righs reserved. 1. Inroducion Velociy of money is one of he mos imporan conceps in moneary Economics which has been more considered by economiss in recen decades. Differen economic schools have vary opinions abou he velociy of money. Classics argued ha i does no impac from economic policies and jus as a funcion of real variables such as he efficiency of he financial and banking sysem, social habis and mode of paymen of wages, and consider i fixed. The neoclassical do no seems velociy of money consan in shor erm, and seems i as a funcion of 254

2 N. Samadpor e al. / Scienific Journal of Review (2014) 3(5) unpredicable financial policies, bu hey argued ha in he long erm has i has no impac on velociy of is changes is quie and slow. According o Keysines and neokeysines, he velociy of money is sricly depended on economic policies, especially Demand-side policies and has exreme volailiy. Friedman s heory for money demand or he Chicago school heory, saes ha, he money demand is a funcion of successor currency asses reurn such as bank ineres raes, bound reurn raes, Expeced inflaion and sock, he rae of Maerial wealh and human wealh o permanen income. Jonung (1983) Bordo and Jonung (1981, 1990) and Bordo, Jonung and Siklos (1997) in he numerous sudies have examined he velociy of money flucuaions a differen periods and differen counries including five American indusrial counries, England, Canada, Sweden and Norway. Based on hese findings, he hypohesis of sable velociy of money in convenional heories was no confirmed. Long-erm behavior of velociy of money flucuaions is aribued in he real and moneary variables such as producion, ineres raes of commercial bank deposis, srucural changes in he money marke and capial and banking sysem developmen. Faig and Jerez. (2005), were reviewed he relaionship beween he precauionary demand for money balances and he velociy of money in America by using a nonlinear leas-squares model for he period Resuls showed ha he improvemens in informaion echnology and he emergence of various credi cards and elephone banking and elecronic banking, precauionary money demand has reduced and he velociy of money has increased in recen decades. Benk, Gillman and Kejak (2008), Kim and Subramanian (2009) also examined he relaionship beween inflaion dynamics and he velociy of money base on he endogenous growh heory in he economy of America for he period and The resuls showed ha he velociy of money during evaluaing periods has significan volailiy. Momenum moneary, ineres rae and efficiency of producion are facors ha influence on velociy of money. 2. Maerials and mehods Following model has been used o invesigae he facors affecing he velociy of money, LV B LRE B LNM B LPC B LDE B Lva B LLI 6 1 B INR B LY D Where he variables are, LV, Log of velociy of money LRE, log of he exchange rae LNM, log of quasi money LPC, Log of money in he hands of persons, LVA, (Logarihm of he remaining banking faciliies o he privae secor) LLi, log of Equiy muliplier INR, Log of he rae of inflaion LY, Log of naional income D, Dummy variable LDE, Log of deposis of non-governmenal Informaion and saisical daa required by he model variables as annual ime series ( ) are drawn from he World Bank websie. Johansson co inegraion echniques are used o esimae he research model. Thus, using his echnique, presence or absence of long-erm equilibrium relaionship beween he variables in equaion (1) has been esed and if he long-run relaionships exis, co inegraion vecor is exraced. Nex, using he error correcion model, shor-erm relaionship beween he model variables esimaed and he shor-erm speed of adjusmen owards long erm equilibrium relaionship will analyzed. 3. Resuls 3.1. Uni roo ess for he variables used

3 N. Samadpor e al. / Scienific Journal of Review (2014) 3(5) To invesigae he variables Sabiliy, Dickey Fuller and Dickey Fuller correcion es was used. The resuls are given in Table 1 and show ha he core values of he variables are non-saionary and firs-order differencing is saionary. Table 1 DF and AD F es resuls for all variables a 95%. firs-order differencing Wihou process Wih process ADF DF ADF DF Criical value Wih process, Wihou process, The es co inegraion Wihou process ADF DF core values Wih process ADF DF variables LV LER LNM LPC LDE Lva LLi INR Ly This es has been made o deermine he co inegraion relaionship beween he velociy of money and is Deerminans. The resuls of his es, in he significance level of 0.05% and presence of 8 co inegraion vecors has been approved. Table 2 Johannes maximum likelihood procedure couneracion LR es based on race he sochasic marix. Hypohesis opions Saisics Criical value of 95% 0 = r 1 = r = r 2 = r = r 3 = r = r 4 = r = r 5 = r = r 6 = r = r 7 = r = r 8 = r = r 9 = r Coinegraion echnique Using he co inegraion mehod, long-erm relaionship beween he velociies of money variable and is affecing facors are esimaed as follows Inerpreaion of co inegraion mehod resuls The resuls of he co inegraion mehod indicae ha, In he long erm, a 1% increase in he exchange rae, inflaion rae, naional income and quasimoney increase he velociy of money o he exen of 0.18%, 0.15%, 0.77%, 0.59%. 256

4 N. Samadpor e al. / Scienific Journal of Review (2014) 3(5) I was also observed ha he naional income and sub-funds have a significan impac on he velociy of money. Table 3 The coinegraion model resuls. LV LPC LRE LDE LY 0.77 INR 0.15 LNM 0.59 LLi 0.65 D The widh of he source On he oher hand 1% increase in privae secor deposis and he money in he hands of individuals has reduced he speed of velociy of money as much as 0.28% an0.25% Error correcion model The general form of he error correcion model used in his sudy is, DLv 1DLpc 2DLRE (1) 3DLDE(1) 4DLY 5DINR 6DLNM 7DKva u(1) 8D A Where he variables are, DLV, firs order difference of he velociy of money logarihm. DLPC (-1), firs order difference money in he hands of individual s logarihm. DLRE (-1) firs order difference of he exchange rae logarihm wih a flashback. DLDE (-1) firs order difference of non-governmenal secor deposis logarihm wih a flashback. DLY (-1) firs order difference of naional income logarihm, wih a flashback, DLNM (-1), firs order difference of he money increased liquidiy logarihm wih a flashback DINR (-1), firs order difference of he inflaion rae logarihm wih flashback DLVa (-1) firs order difference of remaining faciliies o he privae secor logarihm wih a flashback. D, Dummy variable. U (-1), Disrupion of a long-erm model wih a lag ime A, consan value, Table 4 The Resuls of he Esimaed Error Correcion Model. Variable Coefficien Deviaion from he mean DLY (-1) DLNM (-1) DLDE (-1) DLva (-1) DLRE (-1) DLPc (-1) DINR (-1) U(-1) D R. Squared, 64% Adj R Squared, 55% 2.5, Durbin Wason ] 000 [ 6.9, F.Sais ic [0.002] 2.91 Serial Correlaion, Saisic (probabiliy level) [000] 4.58 ] 0.06 [ ] 0.32 [ 0.99 ] 0.05 [ ] 000 [ 4.16 ] [ ] 24 [ 1.17 ] 000 [ ] [ Inerpreing he resuls of error correcion model 257

5 N. Samadpor e al. / Scienific Journal of Review (2014) 3(5) Increase in naional income, exchange raes, inflaion raes and currency in he hands of individuals wih a flashback increases he velociy of money in shor erm. 2- The increase in quasi money remained faciliies o privae secor, deposis wih a flashback, also reduces he velociy of money. 3-The coefficien of he shor erm variable hyseresis wih a laency period suggess ha 35% of adverse shocks incurred in he course of he each period are adjused by he sysem iself. 4. Conclusions In his sudy we examined he velociy of money in he period hrough an economeric model. The resuls show ha he naional income, he increased liquidiy coefficien, significanly affecs he velociy of money in long erm. Also, exchange raes and inflaion rae also has a posiive effec on he velociy of money. Finding a significan behavioral paern for his variable, enables policy maker o predic he opimal size of he money supply o achieve a cerain level of inflaion. On he oher hand he money in he hands of individuals, privae secor deposis has a negaive impac on he velociy of money References Benk, S., Gillman, M., Kejak, M., Money Velociy in an Endogenous Growh Business Cycle wih Credi Shocks. J. Money. Credi Bank., 40(6), Bordo, M.D., Jonung, L., The Long-run Behavior of Velociy, The Insiuional Approach Revisied. J. Pol. Model., 12(2), Bordo, M.D., Jonung, L., he Long Run Behavior of he of he Income Velociy of Money Five Adv. Counr., , An Bordo, M.D., Jonung, L., Siklos, P., Insiuional Change and he Velociy of Money, A Cenury of Evidence. Econom. Inqu., 35(4), Faig, M., Jerez, B., Precauionary Balance and he Velociy of Circulaion of Money. Universiy of Torono. Dep. Econom. Work. papers Ser. daa main. RePEc Main. Jonung, L., Moneizaion and he Behavior of Velociy in Sweden, Explora. Econom. His., 20(4), Johansen, S., Saisical Analysis Coinegraion Vecors J. Econom. Dynam. Conrol., Vol.12, Kim, H.C., Subramanian., Velociy of Money and Inflaion Dynamics, Appl. Econom. Le., 16(18),