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Regular version of the site

Working paper

Estimation of the Money Demand Function in Russia

Sosunov K. A.

In this paper following Ball (2012) I estimate the demand function for narrow money aggregate M1 in Russia for 2003-2012. I show that after inclusion of cash foreign exchange and relevant interest rate  the money demand is stable in the long- and the short-run and estimated long-run elasticities and short-run dynamics of the money demand yields sensible values for the simple functional form.  I also show that most of the short-run volatility of the money holding can be attributed to the slow speed of adjustment of the demand not to the unexplained shocks.