Monetary Dynamics and Demand in Open Economies
Summary
Monetary dynamics in open economies encompass the interplay between domestic money demand and cross-border financial flows, exchange-rate movements and interest-rate differentials. In such contexts, policymakers must account for how external shocks and global capital mobility influence the stability of money demand functions and the velocity of money. Open economies often experience shifts in portfolio preferences as agents respond to foreign asset returns and exchange-rate expectations, leading to fluctuations in liquidity preferences and monetary aggregates. Understanding these dynamics is essential for designing policy frameworks that safeguard price stability and support sustainable growth amid global financial integration. Recent research has deepened insights into the roles of structural breaks, opportunity costs arising from financial openness and the transmission of monetary impulses through both traditional and non-traditional channels.
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Monetary Dynamics and Demand in Open Economies publication trend
The graph below shows the total number of articles in monetary dynamics and demand in open economies across all publications each year (not limited to Nature Index journals).
Technical terms
Money demand function: A relationship expressing desired money holdings as a function of income, interest rates and other determinants.
Velocity of money: The rate at which a unit of currency circulates through the economy over a given period.
Real exchange rate: The price of one currency in terms of another, adjusted for relative price levels.
Monetary aggregate: A category of money supply (such as M1, M2) representing different types of liquid assets held by the public.
Opportunity cost (in money demand): The foregone return on alternative assets when holding money instead of higher-yielding instruments.
References
- The Velocity of Money and Lessons for Monetary Policy in Nigeria: An Application of the Quantile ARDL Approach. Journal of the Knowledge Economy (2024).
- Modelling opportunity cost effects in money demand due to openness. International Journal of Finance & Economics (2020).
- Money and inflation in Switzerland. Swiss Journal of Economics and Statistics (2022).
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