Abstract:
Becoming pervasive the international crisis in the world and their affects leads to extreme researches which study the affects of these crisis on the important economic variables. One of the variables is money demand. International crisis influences on money market via change in exchange and interest rate, it causes to instability in real income and inflation rate and influences internal economic conditions. This paper has investigated the money demand for Iran economy in 1974 -2008 and the affects of financial crisis on money demand and its changes on real income, inflation and exchange rate. Also this studies the trend of changes in money demand stability and the other variables via Auto Regressive Distributed Lag (ARDL) and Error Correction Method (ECM) in dynamic analysis. The coefficient of Gross Domestic Production (GDP) is positive and significantly more than 1. Inflation rate variable is negative expectedly. The significant positive coefficient related to the last financial crisis demonstrates that the money demand will increase. Of course, the short-run affect is negligible and its affects become obvious in long-run
Machine summary:
"There are several economic variables that affect the demand for money, including gross domestic product (GDP), interest rates, inflation rates, financial innovations in the economy, degree of monetization in the economy, exchange rates, structure and level of external trade, and so on.
6. Empirical results This study has tried to study the relation between the affective and important variables on money demand and the affects of financial crises on them via short-run and long-run analysis in Iran.
All interfering policies, laws and formal instructions and informal imposed controls such as interest rate ceilings, credit ceilings, imposing restrictions on directions of credit allocation, capital controls, liquidity ratio requirements, high bank reserve requirements, imposing restrictions on market entry into the financial sector, government ownership and domination of banks cause financial repression expenditure in India and McKinnon (1991), financial repression and capital productivity in a number of less developed countries confirmed the negative effects of financial repression on financial development and economic growth.
His model is as follows: where FRI indicates the financial repression index, RIR real interest rate, RR requirement reserves rate, GOV the ratio of mercantile bank debts from government to mercantile bank debts from private sector and INT is the ratio of liquidity volume to gross national product.
The policies that cause financial repression include interest rate ceilings, liquidity ratio requirements, high bank reserve requirements, capital controls and restrictions on market entry into the financial sector, credit ceilings or restrictions on directions of credit allocation, and government ownership or domination of banks."