This paper examines the long- and short-run determinants of the demand
for money in six countries in the Asian-Pacific region using panel data (1975-
2002). Various country-specific coefficients are allowed to capture inter-country
heterogeneities. Consistent with theoretical postulates, it is found that (a) the
demand for money in the long-run positively responds to real income and inversely to the interest rate spread, inflation, the real effective exchange rate,
and the US real interest rate; (b) the long-run income elasticity is greater than
unity; and (c) both the currency substitution and capital mobility hypotheses
hold only in the long run.