The Interplay of Economic Openness and Money Demand Function: Evidence from Selected Developing Countries

The Interplay of Economic Openness and Money Demand Function: Evidence from Selected Developing Countries | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article The Interplay of Economic Openness and Money Demand Function: Evidence from Selected Developing Countries Peerzada Gh Mohammad, Sajad Ahmad Rather This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-6876986/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This paper investigates the impact of economic openness on demand for money across 24 developing countries from 1990 to 2022. Employing a dynamic panel framework, the research integrates measures of trade and financial openness, as quantified by the KOF Globalization Index, alongside essential macroeconomic variables such as real GDP per capita, real interest rates, and financial development. To address econometric issues like heteroskedasticity and cross-sectional dependence, the analysis employs Driscoll-Kraay(DK) and Panel-Corrected Standard Errors (PCSE) techniques. The findings indicate a significant negative correlation between openness and real money demand, suggesting that increased global integration diminishes reliance on domestic monetary assets by facilitating access to foreign financial instruments and alternatives. Additionally, the influence of financial development intensifies over time, while the effects of income and interest rates display temporal variations, particularly after 2000. Structural break analysis reveals notable regime shifts aligned with global economic events. These results have critical implications for monetary policy in developing economies, underscoring the need for adaptive strategies that account for the evolving interplay between globalization and monetary dynamics. JEL Code: E4, E5, E6, G1. Macroeconomics Other Economics Money Demand Function Developing economies PCSE Model DK Model Full Text Additional Declarations The authors declare no competing interests. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-6876986","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":470170157,"identity":"603921f2-6869-4553-a869-2eedc9ad0155","order_by":0,"name":"Peerzada Gh Mohammad","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAAvUlEQVRIiWNgGAWjYJCCAwwGNnJgxgPitRSkGYMZCcTb8+FQYgOIJkqLfNjZg4crDA6kzw87/BBoi52cbgMBLYa38xIOnjG4k7vxdpoBUEuysdkBQlpm5xgcbDB4lrtxdgJIy4HEbURqOZxuODv9A3Fa5KUhWhJADOK0GEgD/dJgkGa4QTqn4ECCARF+kZ+de/hjwx8befnZ6Zs/fKiwkyOoxeAAD4wBJgkoB9vSwANjEKF6FIyCUTAKRiYAADP5TJkxOlDTAAAAAElFTkSuQmCC","orcid":"https://orcid.org/0009-0009-9584-7776","institution":"Baba Ghulam Shah Badshah University, Rajour Jammu and Kashmiri","correspondingAuthor":true,"prefix":"","firstName":"Peerzada","middleName":"Gh","lastName":"Mohammad","suffix":""},{"id":470170158,"identity":"f3a91567-486e-41ed-bf58-088b610288d9","order_by":1,"name":"Sajad Ahmad Rather","email":"","orcid":"https://orcid.org/0009-0004-1256-672X","institution":"Baba Ghulam Shah Badshah University, Rajour Jammu and Kashmiri","correspondingAuthor":false,"prefix":"","firstName":"Sajad","middleName":"Ahmad","lastName":"Rather","suffix":""}],"badges":[],"createdAt":"2025-06-12 06:18:19","currentVersionCode":1,"declarations":{"humanSubjects":false,"vertebrateSubjects":false,"conflictsOfInterestStatement":false,"humanSubjectEthicalGuidelines":false,"humanSubjectConsent":false,"humanSubjectClinicalTrial":false,"humanSubjectCaseReport":false,"vertebrateSubjectEthicalGuidelines":false},"doi":"10.21203/rs.3.rs-6876986/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-6876986/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":84531511,"identity":"795644f4-0f21-4156-9446-dcaf50d1d54d","added_by":"auto","created_at":"2025-06-13 06:12:15","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":664147,"visible":true,"origin":"","legend":"","description":"","filename":"Manuscript.pdf","url":"https://assets-eu.researchsquare.com/files/rs-6876986/v1_covered_0f55f3a0-a49b-4950-9ede-be93b8c8d925.pdf"}],"financialInterests":"The authors declare no competing interests.","formattedTitle":"\u003cp\u003e\u003cstrong\u003eThe Interplay of Economic Openness and Money Demand Function: Evidence from Selected Developing Countries\u003c/strong\u003e\u003c/p\u003e\n\u003cp\u003e\u003cbr\u003e\u003c/p\u003e","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":true,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Money Demand Function, Developing economies, PCSE Model, DK Model","lastPublishedDoi":"10.21203/rs.3.rs-6876986/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-6876986/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eThis paper investigates the impact of economic openness on demand for money across 24 developing countries from 1990 to 2022. 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