Abstract:

In this study the determinants and stability of money demand in Turkey are examined by Johansen 1988 and Johansen and Juselius 1990 Multivariate Cointegration Analysis for the period between 1987 1 and 2007 2 Money demand functions are being estimated by creating alternative models with narrow and wide M1 M2 M2Y monetary aggregates income interest rate inflation and exchange rate In this context one of the aim of this study is detecting the optimal monetary aggregate for money demand whilst other one is introducing the determinants of money demand Findings show that money demand function with narrow monetary aggregate M1 is in a stable relationship with income interest rate and or inflation variables Also impulse response analysis confirms that marrow money demand is effected positively by income and negatively by interest rate and inflation Key Words: Money Demand Cointegration Analysis Error Correction Modeling Impulse Response Analysis

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