Assessing the role of advertising expenditure in money demand function using alternative monetary aggregations

Hiew, Lee Chea (2015) Assessing the role of advertising expenditure in money demand function using alternative monetary aggregations. PhD thesis, Universiti Malaysia Sarawak, (UNIMAS).

PDF (Please get the password by email to repository@unimas.my , or call ext: 082-583914/3942/3933) Hiew.pdf Restricted to Registered users only Download (2MB)

Abstract

Over the last decade, Brazil, Russia, India and China (BRIC countries) have experienced the fastest and most active economic growth among emerging countries. However, the rapid financial developments in these countries have altered their monetary policy channels and threatened the stability of their money demand functions. To formulate a more credible and well-defined money demand function (MDF), the potential regressee and regressors must be identified. In this thesis, a non-traditional regressor, the advertising expenditure (ADEX) variable, was incorporated in the estimation of MDF for BRIC countries. In addition, to compare the performance of other alternative monetary aggregates for BRIC countries’ MDF, the simple-sum, Divisia and currency-equivalent (CE) money for both M1 and M2 were included in the analyses. For this purpose, the indices and monetary aggregates for Divisia and CE were then constructed using a “self-developed” data template. The impact of the role of ADEX on BRIC countries' MDF and the performance of monetary aggregates were examined with an autoregressive distributed lag (ARDL) approach. Supportive evidence for the use of ADEX in formulating the MDF for BRIC countries was found. Empirical findings indicated that ADEX can positively influence the demand for money in both the short and long term, as in the case of BRIC countries. Moreover, use of the Divisia M2 (DM2) monetary aggregate in MDF was superior to the other monetary aggregates since more plausible results that were consistent with a priori theory were generated in the case of Brazil, India and China. For Russia, both Divisia M1 ii (DM1) and DM2 monetary aggregates outperformed their simple-sum counterpart and CE aggregates. Therefore, the present thesis adds to the existing body of knowledge on MDF by empirically exploring the impact of ADEX on money demand and on this proposed variable, which can be considered a non-traditional regressor for the estimation of MDF in future research. Furthermore, the significance of Divisia monetary aggregates must be highlighted, especially in generating a sound MDF and for monetary policy implementation purposes. By and large, a better understanding of the cause and effect of the demand for money may help policymakers in devising the best monetary policy for a country.

Actions (For repository members only: login required)

View Item