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The purpose of this paper is to analyze narrow money demand functions for the Pacific Island countries (PICs) and evaluate their stability. The selected PICs are Fiji, Vanuatu, Samoa (SAM), Solomons and the Papua New Guinea. The stability of the demand for money is vital for the formulation of the monetary policy.

The augmented Dicky‐Fuller method is employed to test the time series properties of the variables. Alternative time series techniques such as general to specific (GETS) and Johansen maximum likelihood (JML) are used with annual data from 1974 to 2004 (except for SAM with data from 1980 to 2004) to estimate the narrow money demand equations. To draw inferences relative to the stability of the parameters, the study applies the cumulative recursive sum of recursive residuals (CUSUM) and the cumulative sum of squares of recursive residuals (CUSUMSQ).

The results from the time series approaches of GETS and JML suggest that real income, nominal rate of interest and real narrow money are cointegrated. The CUSUM and CUSUMSQ stability test results indicate that the demand for money functions for these countries are stable and, therefore, the respective monetary authorities may consider targeting money supply in their conduct of monetary policy. It is argued that the financial sector reforms and liberalization is yet to have any significant effects on the money demand in the PICs.

The methods of estimation does not allow for structural breaks in the cointegrating relationship. It is hoped that future research may focus on using the structural break techniques and also investigate the stability of the demand for broad money in the PICs. Further due to limitations in the data, the authors were only able to select five PICs.

This is the first paper in the literature that provides long‐run estimates and stability results of the narrow money demand using the newest time series techniques for a group of PICs over the period 1974‐2004.

The purpose of this paper is to utilize the new specification proposed by Rao and Singh to estimate export demand equations for Asian developing countries, viz. India, China, The Philippines, Indonesia, Singapore and Malaysia. In this specification of export demand, exchange rate is included in the relative price variable.

The augmented Dicky‐Fuller method is applied to test the time‐series properties of the variables. The time‐series techniques of Phillip‐Hansen's fully modified ordinary least squares and Johansen's maximum likelihood are used with annual data from 1970 to 2007. The Granger causality test determines the causality direction between income, relative prices and exports.

The paper confirms that there exists a long‐run cointegrating relationship between real exports, real income of trading partners and relative prices. The long‐run income elasticities range between 1 and 1.3 and the relative price elasticities range between −1 and −1.4. Our Granger causality results imply that in the long‐run income and relative prices Granger cause exports in these countries.

Structural breaks and trade shock analysis were ignored.

The results imply that exports should be treated as an engine of growth in the Asian developing countries and the export promotion policies such as subsidies, special credits and tax concessions should be encouraged. The relative price elasticities imply that exports are competitive in the international market and these countries have the option to devalue their currency to enhance export earnings. Although the real devaluation of the currencies will push import costs high, eventually this motivates the local firms to undertake alternative options, for instance, import substitution. Further, the gains resulting from the export growth policies will be attractive.

The paper assesses the magnitudes of export elasticities with a specification that includes exchange rate in relative price variable.

Purpose– The purpose of this paper is to estimate the export demand equation for China with appropriate specification that incorporates exchange rate in the relative price variable. Design/methodology/approach – Alternative time series techniques such as general to specific and Johansen maximum likelihood are used with annual data from 1974‐2004. The augmented Dicky–Fuller and Elliot–Rothenberg–Stock methods are also employed to test the time series properties of the variables. Findings – The paper confirms that there is a cointegration relationship between real exports, real income and relative prices in China. The long‐run income elasticity is around 1.3 and the relative price elasticity is around −1.5. In addition, the export demand functions are temporally stable in China. Research limitations/implications – The structural breaks and trade shock analysis were ignored because that would have made this paper much longer. Practical implications – The results imply that exports are an engine of growth in China. China's exports are competitive in the international market and it has the option to devalue its currency to promote export earnings. However, the paper argues that in current global economic crises, trade promotion policies such as subsidies, tax exceptions and special credit lines should be encouraged. Originality/value – The paper assesses the magnitudes of export elasticities with a specification that includes exchange rate in relative price variable.