Thesis Open Access
CAN THE MONTARY AUTORITY CONTROLE THE STOCK OF MONEY SUPPLY IN ETHIOPIA: AN EMPERICAL INVESTIGATION
GASHAW DESALEGN
The aim of this paper is to investigate empirically the ability of Nation Bank of Ethiopia to
control the stock of money supply. This investigation seems to conform to the ongoing
controversy surrounding the exogeneity /endogeneity hypothesis regarding the money supply i.e.
the controllability/non-controllability of the money supply by the Central Bank. The paper has first
tested the money multiplier model which says money is exogenous and thus controllable by central
banks. We examine the constancy and Stationarity of the money multiplier and the results
suggest that the money multiplier remains non stationary for the entire sample period. We then
tested cointegration between money supply and monetary base and find the evidence of
cointegration between two variables. The coefficient restrictions are satisfied only partially. The
result from this model shows it will be difficult to use the money multiplier model as a frame
work for monetary policy
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- Publication date:
- June 1, 2014
- DOI:
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- License (for files):
- Creative Commons Attribution