Abstract:
This study considers a simultaneous model that represents
interrelationship between nominal money and real output. The money demand
equation includes wholesale price index of agricultural products, exchange rate, and
volume of real output. The output model, on the other hand, considers a dichotomous
variable representing the volume of aid of the affluent countries (higher or lower
than commitment), investment volume and nominal money. The OLS and 2SLS
estimation methods have been used to obtain the parameters of the model. The
estimated results suggest that the simultaneous equation model in the present case
fits the data reasonably well.
