인플레이션 期待下의 貨幣需要

Inflationary Expectations and the Demand for Money in Korea

Milton Friedman argued that physical goods should be regarded as a substitute for money and that higher expected rates of inflation should induce a portfolio shift from money to physical assets. As Friedman has derived his equation, the demand for real balances is a function of the expected rate of inflation in addition to nominal interest rates and real income. A number of empirical studies for different countries have shown that the anticipated rate of inflation has an independent direct effect on the demand for money, other than via interest rates. But in Korea, there are few studies about the role of expected rate of inflation in the demand for money. The purpose of this paper is to test the significance of the sorted-out independent effect of the expected rate of inflation on real balances and to suggest more appropriate monetary policy in such country suffering high inflation as Korea. In this paper a real partial adjustment mechanism of money demand is assumed. And the expected rate of inflation is estimated by the stochastic time series model (ARIMA model). According to the evidence of this paper, the expected rate of inflation exerts significant influences upon money holdings, while nominal rate of interest has little explanatory powr in money demand function. This confirms the fact that nominal rate of interest has been under the strict government control and has not reflected the opportunity cost of money holdings in Korea. These results suggest that monetary authority should control money supply more carefully in Korea, where everyone has inflationary expectations. In further studies particular emphasis should be given on the mechanism of price expectations formation associated with .the appropriate specification of the money demand function and the correct forecast of the effect of monetary policy.