Thesis Abstract

Abstract
This research project aims to re-examine the demand for money in Fiji, focusing on understanding the key determinants that influence individuals' and businesses' decisions regarding the holding of money balances. The study delves into the various theoretical frameworks that have been used to analyze money demand, including the traditional quantity theory of money, the Baumol-Tobin model, and the cash-in-advance model. By employing empirical analysis techniques, such as econometric modeling and time series data analysis, the research seeks to provide insights into the dynamics of money demand in Fiji. The study recognizes the importance of understanding the demand for money in the context of a developing economy like Fiji, where factors such as income levels, inflation rates, interest rates, and financial market development play crucial roles in shaping individuals' and businesses' preferences for holding money. By re-examining the determinants of money demand in Fiji, this research contributes to the existing literature on monetary economics and provides valuable information for policymakers and central bankers in formulating effective monetary policies. Furthermore, the research project aims to investigate the implications of technological advancements and the increasing adoption of digital payment methods on the demand for money in Fiji. With the rise of electronic banking services and mobile payment platforms, the traditional concept of money demand may undergo significant changes. By exploring how these technological innovations impact individuals' and businesses' use of cash and demand for money balances, the study offers insights into the evolving nature of money demand in a digital age. The findings of this research have implications for both academic research and practical policymaking. By shedding light on the determinants of money demand in Fiji and examining the effects of technological advancements on money usage patterns, the study provides a comprehensive analysis of the factors influencing the demand for money in a developing economy. Ultimately, the research contributes to a deeper understanding of the role of money in the economy and informs discussions on monetary policy effectiveness and financial stability in Fiji and similar contexts.

Thesis Overview

The demand for money is at the heart of how policy should be conducted effectively. Money demand serves as a conduit in the transmission mechanism for monetary policy so the stability of the money demand function is critical if monetary policy is to have predictable effects on inflation and real output. In most developed and developing countries, policymakers have frequently questioned whether the demand for money is stable. Generally, the majority of studies find that the demand for money is unstable and monetary aggregates have lost their influence in the conduct of monetary policy. In Fiji, for some time, the role of monetary aggregates as intermediate targets has been downplayed. However, there has been renewed interest in the stability of the demand for money in Fiji and so this paper’s objective is to re-examine this topical issue. Because of ongoing financial sector reforms1, the determinants of money demand in Fiji will be difficult to establish. Nevertheless, this paper aims to provide a sound theoretical and empirical basis for modeling the demand for money. This paper employs co-integration analysis to examine the stability of the demand for money. Additionally, the error correction technique is also used to confirm the findings of the co-integration analysis.