Modeling of Money Demand Function and Estimating Engle Curve in Iran (Using EASI Demand System)

This paper seeks to investigate and analyze the money demand function and its Engle curve in Iran. Money demand function and its Engle curve have been estimated through EASI demand system by making use of monthly data 1995:04-2007:03. The investigation of money demand function shows that monetary elements are weak substitutions of each other. Thus، some policy recommendation is provided on the basis of estimated elasticity (Income، Price، cross Price، and Morishima). Moreover، the investigation of Engle curve reflects that by the increase of income، first، individuals extract their money from demand deposit. Secondly، investment in timed deposits increases and thirdly، no change is observed in the amount of money being held as currency and travel checks.