Prague Economic Papers 2016, 25(3):321-334 | DOI: 10.18267/j.pep.564

Money Market Equilibrium in the Czech Republic

Jana Juriová
V©B-Technical University of Ostrava, Faculty of Economics, Ostrava, Czech Republic (jana.juriova@vsb.cz).

This paper examines the theoretical concept of equilibrium in the money market that is empirically verified for the economy of the Czech Republic. The subject of the analysis is the relationship defining equilibrium in the domestic money market, i.e. when money demand corresponds to the money supply in the economy. The main objective is to determine whether such a long-term equilibrium relationship exists by verifying this assumption on real data for the Czech economy. The Johansen cointegration approach is applied for modelling the money demand function including four domestic macroeconomic indicators: money supply, price level, gross domestic product, and interest rate. The results suggest that the level of real money supply fluctuated around the estimated long-run equilibrium value in the analysed period 2000-2013.

Keywords: OLS, money supply, money market, money demand, long-run equilibrium, error-correction model, cointegration
JEL classification: E41, E47

Published: January 1, 2016  Show citation

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Juriová, J. (2016). Money Market Equilibrium in the Czech Republic. Prague Economic Papers25(3), 321-334. doi: 10.18267/j.pep.564
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