The Stability Analysis of The Money Demand with ARDL Model Approach in Inflation Targeting Process: The Cases of Turkey and Indonesia

WOS: 000441974700004This paper examines the relationship between the money demand and determinants of the money demand during the inflation targeting in Turkey and Indonesia. The research uses data from 2002:Q1-2013:Q2 time period for Turkey and 1991:Q1-2013:Q2 term for Indonesia. Autoregressive Distributed Lag (ARDL) Model and CUSUM Test results have shown not found a relationship between income level, interest rate and inflation with money demand for both short-run and long-run in Turkey. In contrast, the research has found a significant and stable relationship between income level, interest rate and inflation just for long-run in Indonesia. This finding shows that there is not a structural break to change the direction of stability. In this context, the findings are also important to show that we cannot make a generalization regarding the stability of money demand for the time period in which inflation targetting regime was implemented