Economic Uncertainty, Monetary Uncertainty, and the Demand for Broad Money in Egypt

Despite the recent implementation of a number of economic reforms and structural adjustment programs to liberalize Egypt's financial system, this study finds that a stable broad money demand function exists when proper account of asset substitution is taken and an appropriate estimation technique is employed. In particular, the use of measures for economic uncertainty and monetary uncertainty in the formulation of the demand for broad money provides strong evidence that the demand for broad money in Egypt is stable. Furthermore, the results show that both the measures of uncertainty have significant short-run and long-run effects on the demand for broad money in Egypt