The Validity of the Endogenous Money Hypothesis in the Eurasian Economic Union Countries

Abstract

The endogeneity of the money supply hypothesis is one of the most discussed and researched topics in the theoretical and empirical literature. According to this hypothesis, the money supply is determined internally within the economy. The aim of this study is to test this hypothesis in the member countries of the Eurasian Economic Union. In order to achieve the goal, the quarterly data of the five countries for the years 2010-2021 was analyzed by panel data analysis. First of all, bank loans were taken as the dependent variable and it was determined that there is a cointegration relationship between these variables. While all three independent variables affected the total loan amount in the short run, the coefficient of money supply was statistically insignificant in the long run. According to the results, one dollar increase in deposit amount increases the loan volume to $0.06 on average in the long run. A one-dollar increase in GDP increases it to 0.3 dollars. In addition, the panel ARDL cointegration test was applied by accepting the deposit amount, M2, M2X money supply and GDP variables as the dependent variables, but no cointegration relationship was found between the variables in all models. In the light of these results, it can be said that the money endogeneity hypothesis is not valid in the Eurasian Economic Union countries in general.