DEMAND FOR MONEY IN SINGAPORE

Abstract

Previously, a lot of economists have made an estimate of the demand for money in Singapore. The data that they used are different. Wong Kum Poh used annual data from 1961 - 1978; William H. Branson used annual data from 1967 - 1978; Mohsin K. Khan used quarterly data from 1972 - 1979 and Lee Sheng Yi used quarterly data from 1968.I - 1982.I. In this academic exercise, I use quarterly data from 1978 - 1987, so as to make an attempt to estimate the latest demand for money in Singapore. We first examine the functions of money and the importance of studies on the demand for money functions. We move on to review the theories of money and comparison is made between two different schools of thought, the Keynesian approach and the monetarist approach. A review of the different models that have been used by economists to estimate the demand for money is made. Finally, we estimate the demand for money in Singapore using 1978 - 1987 data for real income, interest rate and expected change in prices. A conclusion is made whether the estimates of the various parameters follow the views of the Keynesian, monetarist or both.