Open Access Open Access  Restricted Access Subscription Access

Investigating the Structural Stability of the Theoretical Money Multiplier Model in Lesotho: A Flexible Least Squares Approach

Moeti Damane

Abstract



This study investigated the structural stability of the theoretical money multiplier model for Lesotho using Flexible Least Squares (FLS) and monthly data from 2010M1 to 2018M12. FLS results indicate that the Ordinary Least Squares (OLS) solution for the money multiplier model is not robust to a relaxation in the assumption of time-invariant coefficients. Conversely, empirical evidence reaffirms the prior belief of slow coefficient evolution in the country’s money multiplier model. Should the Central Bank of Lesotho explore the incorporation of the money multiplier model into its modelling toolkit to improve determination of the level of narrow money in the economy, the study recommends for there to be allowance of even small amounts of coefficient time variation in the specification of the money multiplier model for Lesotho. This will lead to reductions in explained variance emanating from the measurement equation.

Keywords


Money multiplier; Lesotho; Flexible Least Squares, Time series data; Macroeconomics

Full Text:

PDF


Disclaimer/Regarding indexing issue:

We have provided the online access of all issues and papers to the indexing agencies (as given on journal web site). It’s depend on indexing agencies when, how and what manner they can index or not. Hence, we like to inform that on the basis of earlier indexing, we can’t predict the today or future indexing policy of third party (i.e. indexing agencies) as they have right to discontinue any journal at any time without prior information to the journal. So, please neither sends any question nor expects any answer from us on the behalf of third party i.e. indexing agencies.Hence, we will not issue any certificate or letter for indexing issue. Our role is just to provide the online access to them. So we do properly this and one can visit indexing agencies website to get the authentic information. Also: DOI is paid service which provided by a third party. We never mentioned that we go for this for our any journal. However, journal have no objection if author go directly for this paid DOI service.