Sidrauski's Money Demand Approach in Iran's Economy

Demand for money is a key component in many macroeconomic theories that always it has been subject of extensive debate among economists. Evaluating this function in macroeconomic problem solving and appropriate policies is important. In other words, fiscal and monetary policy adoption depends on the notice of money demand function and its influencing factors in the economy of each country, so the main objective of this paper is theoretical explanation and estimating money demand of Iran using sidrauski's pattern. Since private consumption in each country's economy is a major part of the aggregate demand, the analysis of this sector and its effect on money demand is very important. For this purpose, in empirical part, modified sidrauski's pattern and annual data have been used over the period 1360-1392 and also for estimating long-run effect of the variables of model on money demand and short-run effect respectively are used auto regression model of distributed lag (ARDL) and error correction model (ECM). The results suggest that consumption has a significant and positive effect on the demand for money in the short-run and long-run, so there is a long-run balance between money demand and private consumption. Inflation tax has also positive and significant effect on money demand in long-run and short-run but consumption tax does not have any significant effect on money demand in the period of 1360-1392