Alireza Zarei, Sunway University: The paper discusses the stability of money demand in Laos PDR. The study is motivated to improve the monetary policy implementation within the context of a transitional and dollarized economy of Laos. Another motivation of the paper is that there is no study to date to test the money demand for the Laos economy. The specification of the money demand function is modified by considering additional variables such as exchange rate movements and foreign currency deposit rates in line with Siddiki (2000). A time-series approach to Autoregressive distributed lags (ARDL) cointegration and Vector Error Correction Model (VECM) causality is taken into consideration. The findings report evidence of money demand stability in the long-run and short-run when the exchange rate variable is incorporated.
The paper discusses that the economy of Laos is dollarized such that foreign currency, particularly the U.S. dollar, is used as means...