Empirical Analysis of Demand for Real Money Balances in Africa: Panel Evidence from Nigeria and Ghana

Nelson C. Nkalu* (Corresponding Author)

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)
20 Downloads (Pure)


This study investigates demand for real money balances in Africa using panel time-series data from Nigeria and Ghana between 1970 and 2014. The study employs Levin, Lin, Chu common unit root process and Pedroni Residual Cointegration Test which the results reveal that all the variables in the model are stationary and cointegrated respectively. Data sourced from the World Development Indicators (WDI) were analyzed using Panel Two-Stage Estimated Generalized Least Squares (cross-section Seemingly Unrelated Regression model (SURE)) with Instrumental Variables (IV). The results conform to the liquidity preference theory, with all the variables – inflation, real interest rates, and official exchange rates are statistically significant except real income. It is recommended that the monetary authorities in Africa especially the economies of Nigeria and Ghana should adopt appropriate monetary policies by placing interest rates, inflation and official exchange rates at acceptable levels to boost income through private sector investments.

Original languageEnglish
Pages (from-to)363-376
Number of pages14
JournalAfrican and Asian Studies
Issue number4
Publication statusPublished - 16 Dec 2020

Bibliographical note

Open Access via the Brill Open Access Agreement


  • Real Money Balances
  • Panel EGLS
  • interest rates
  • inflation
  • real income
  • Africa
  • Nigeria
  • Ghana


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