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Cointegration, Financial Innovation and Modelling the Demand for Money in Italy

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  • Muscatelli, Vito Antonio
  • Papi, Luca

Abstract

Problems encountered in the empirical modeling of the demand for money in Italy have usually been attributed to the presence of financial innovation in the last two decades. This paper constructs a model of the demand for M2 in Italy by explicitly incorporating variables that proxy the various processes of financial innovation. Various integration and cointegration tests are used in order to establish that the chosen regressors in the model are cointegrated. The Engle-Granger two-step estimation procedure is then used in order to estimate the authors' model, which is found to be stable over the last decade. Copyright 1990 by Blackwell Publishers Ltd and The Victoria University of Manchester

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Bibliographic Info

Article provided by University of Manchester in its journal The Manchester School of Economic & Social Studies.

Volume (Year): 58 (1990)
Issue (Month): 3 (September)
Pages: 242-59

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Handle: RePEc:bla:manch2:v:58:y:1990:i:3:p:242-59

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Cited by:
  1. Bahmani-Oskooee, Mohsen, 2001. "How stable is M2 money demand function in Japan?," Japan and the World Economy, Elsevier, vol. 13(4), pages 455-461, December.
  2. Carlo Monticelli & Marc-Olivier Strauss-Kahn, 1992. "European integration and the demand for broad money," BIS Working Papers 18, Bank for International Settlements.
  3. A.E.Akinlo, 2012. "Financial Development and the Velocity of Money in Nigeria: An Empirical Analysis," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 4(2), pages 097-113, December.
  4. Bahmani-Oskooee Mohsen & Shin Sungwon, 2002. "Stability of the Demand for Money in Korea," International Economic Journal, Taylor & Francis Journals, vol. 16(2), pages 85-95.
  5. Salvatore Capasso & Oreste Napolitano, 2012. "Testing for the stability of money demand in Italy: has the Euro influenced the monetary transmission mechanism?," Applied Economics, Taylor & Francis Journals, vol. 44(24), pages 3121-3133, August.
  6. Renato Filosa, 1995. "Money demand stability and currency substitution in six European countries (1980-1992)," BIS Working Papers 30, Bank for International Settlements.
  7. Carlo Monticelli, 1993. "'All the money in europe?' An investigation of the economic properties of EC-wide extended monetary aggregates," BIS Working Papers 19, Bank for International Settlements.
  8. Browne, F.X. & Fagan, G. & Henry, J., 1997. "Money Demand in EU Countries : A Survey," Papers 7, European Monetary Institute.
  9. Lee, Chien-Chiang & Chen, Pei-Fen & Chang, Chun-Ping, 2007. "Testing linearity in a cointegrating STR model for the money demand function: International evidence from G-7 countries," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 76(4), pages 293-302.
  10. Mohsen Bahmani-Oskooee & Hafez Rehman, 2005. "Stability of the money demand function in Asian developing countries," Applied Economics, Taylor & Francis Journals, vol. 37(7), pages 773-792.
  11. Arize, A. C., 1996. "Real exchange-rate volatility and trade flows: The experience of eight European economies," International Review of Economics & Finance, Elsevier, vol. 5(2), pages 187-205.
  12. Mohsen Bahmani-oskooee & Charikleia Economidou, 2005. "How stable is the demand for money in Greece?," International Economic Journal, Taylor & Francis Journals, vol. 19(3), pages 461-472.
  13. Carlo Monticelli, 1996. "EU-wide money and cross-border holdings," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 132(2), pages 215-235, September.
  14. Shahrestani, Hamid & Sharifi-Renani, Hosein, 2007. "Demand for money in Iran: An ARDL approach," MPRA Paper 11451, University Library of Munich, Germany.
  15. Muscatelli, V. Anton & Spinelli, Franco, 2000. "The long-run stability of the demand for money: Italy 1861-1996," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 717-739, June.
  16. Akinlo, A. Enisan, 2006. "The stability of money demand in Nigeria: An autoregressive distributed lag approach," Journal of Policy Modeling, Elsevier, vol. 28(4), pages 445-452, May.

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