Abstract
The objective of the paper is to estimate a separate demand function for component of M2 in Pakistan, by using co-integration and error-correction techniques, based on the annual data set for the period of 1971-72 to 1998-99. Results show that currency in circulation and demand deposits are inelastic to interest rates and exchange rates, but highly elastic to income. On the contrary, quasi money is elastic to interest rates and exchange rates and inelastic to income changes.
