Stability of the money demand function

Empirical evidence from Libya

Abstract

This study aims to analyze the demand function of money in the broad concept (M2) for the period 1980-2018 and to test its stability and its role in choosing the appropriate monetary policy, (ARDL) was used to measure the relationship between money demand (M2) as a dependent variable and the independent variables: GDP, inflation, Circulation Speed of money, real exchange rate of the Libyan Dinar. The results of the study showed that the variables are on the integration of each other and that they tend to balance in the long term and that the variables (GDP, inflation, speed of money by turnover, the real exchange rate of the Libyan dinar) are the determinants of demand for money in Libya in the long term, , as the study revealed the instability of the demand function.