Demand for money and shortages in Ethiopia

The paper discusses the long-run monetary conditions in Ethiopia in the last three decades. These decades can be characterized by large political changes, leading to shocks on income and population growth, and two serious periods of drought. Both affected inflation and real demand for M1 through shortages of food. Shortage due to drops in rainfall might have long-run monetary consequences. Despite regime shifts we find support for stability of Ethiopian narrow money demand.