Estimation of demand function for real cash balances in the Algeria economy (1990-2019)

Abstract

The study aims to estimate the demand function for real cash balances in Algeria during the period (1990-2019), using the (FM-OLS) method. It is one of the methods of cointegration that is distinguished by its ability to solve the problem of self-reliance and parameter bias. The real income variable, interest rate, inflation rate, exchange rate of the dinar against the US dollar, and trade openness were relied on. The study also analyzed the development of the monetary mass and the speed of money circulation during the study period, in addition to discussing the monetary stability factor in Algeria. The study concluded that there is a long-term stable relationship in which real income, interest rate, and exchange rate affect the demand for money, while inflation and trade openness had no effect.