The specification of money demand function is one of the most
important and disputable subjects in economics. With regard to its importance, many of economists have represented several theorizes about money demand.
The Sidrauski monetary model is an interesting theory of money demand.
Sidrauski extended Ramsey model with regard real balance of money which in the
Sidrauski model the utility function involves both consumption and money. Application
of Sidrauski model can help to extend
macroeconomics with micro foundations in Iran and prepares new scopes for
researchers. The main aim of this paper is to estimate the Sidrauski monetary model for Iranian economy over the period
of 1979 -2011. For this purpose, the Engle – Granger, ARDL and Johansen-
Juselius approaches have been used for estimation of long run relationship of
money demand. The empirical results of econometric estimation of co-integration
vector indicated a long run relationship between per capita money demand, per
capita consumption, and inflation rate, rate of interest, exchange rate, per
capita income, and stock exchange price index. Our
results showed that per capita consumption and per capita income have positive
and significant effect on per capita money demand. Whereas inflation rate, rate
of interest, exchange rate and stock exchange price index
have negative and significant effect on per capita money demand.
