Money Demand in Jordan

The goal of this paper is to employ the Johansen procedure, along with innovation accounting analysis to estimate the demand for money in Jordan. Our study represents a modest attempt to help better understand the behavior of money demand function in Jordan. Two different models were tested. In the first model money in nominal terms was used. Since our analysis found no money illusion, in the second model, real money was used. This paper casts some doubt concerning the validity of previous studies that applied the conventional methods of estimation to non stationary time series data