Money Demand in Saudi Arabia: An Exchange of Views: GNP as a Variable for the Demand for Money in Small Oil Economies: A Comment

In a recent article in this journal Ali Darrat estimated a money demand function for Saudi Arabia (1962/I‐1981/IV) showing that domestic money holdings were significantly influenced by external factors: foreign interest rates and currency exchange rates. This comment is intended to clarify some basic misconceptions about the scale variable he used in this function, which may affect the validity of his strong empirical evidence.