| Summary: | 碩士 === 輔仁大學 === 經濟學研究所 === 95 === The research in the stationary of money demand function is an important theme for discussion. However, most of literature focus the samples on developed countries or some organization for economy. With the strength of Asian economy rising sharply, we are interested in the stability of money demand function in Asia.
Most monetary literature think that transaction costs is very small so that we can ignore it. Nevertheless, if we ignore the importance of transaction costs, the monetary authority can’t enforce their monetary policies successfully. In this paper, I employ the test procedures of Johansen（1988）、Kao（1999）and Pedroni（1999）cointegration approach to exam whether the money demand function is stable after taking into account the existence of transaction costs. The evidence shows that transaction costs is more important for M1 than that for M2 in the stability of money demand function. Therefore, we suggest that the monetary authority must take account of transaction costs which make money demand function stable so as to implement their policies smoothly.
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