Estimating Money Demand for Ghana

The study suggested that money demand function for Ghana using M1 and M2 remained relatively unstable between 1991 and 2011 as evidenced by trends in recursive residual and the cumulative sums of squared residuals derived from the estimated models. However, real money demand function for broad money (M2+) was found to be stable relative to real money demand functions estimated for M1 and M2 as dependent variables. The study therefore concluded that real money demand function for M1 and M2 remained relatively unstable in Ghana compared with real money demand function for broad money which exhibits some degree of stability.