Stability of vietnam money demand function: An empirical application of multiple testing with a structural break

Abstract

The paper aims to exam the structural break on a stable money demand function in Vietnam during the period 2003 Dec to 2017 Nov. The Gregory-Hansen’s cointegration test reveals the break date in 2008 end, consistency with the global financial crisis boomed. An interesting result after investigating sub-sample periods, the narrow money demand (M1) becomes stable in pre and post-crisis through multiple testing of stability. However, there is a doubt about the impact of structural regime from the crisis on the stability of broad money demand (M2). The finding moreover highlights that empirical money demand functions might have been unstable simply as a result of important variables omission.