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Estimating a European Demand for Money

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  • Hayo, Bernd

Abstract

European Monetary Union will come into existence in 1999. This raises questions related to the monetary policy targets that will be adopted by the European Central Bank (ECB). For both likely candidates, targeting a money aggregate or an inflation target, the existence of a stable money demand function at a European level is important. In this paper estimates of such a European money demand for narrow and broad money for the actual 11 EMU countries based on quarterly aggregate data from 1964 to 1994 are presented. It is argued that statistically satisfactory and economically interpretable functions can be found. Moreover, the estimated models appear to be stable over a period of 20 quarters. This raises the hopes that the ECB will face a stable money demand and be able--at least for a certain time--to use past aggregate data for policy purposes. Copyright 1999 by Scottish Economic Society.

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Bibliographic Info

Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 46 (1999)
Issue (Month): 3 (August)
Pages: 221-44

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Handle: RePEc:bla:scotjp:v:46:y:1999:i:3:p:221-44

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  1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
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Citations

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Cited by:
  1. Arnold, Ivo J. M. & de Vries, Casper G., 2000. "Endogeneity in European money demand," European Journal of Political Economy, Elsevier, vol. 16(4), pages 587-609, November.
  2. Jürgen von Hagen, 2004. "Hat die Geldmenge ausgedient?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 5(4), pages 423-453, November.
  3. Hossain, Akhand Akhtar, 2010. "Monetary targeting for price stability in Bangladesh: How stable is its money demand function and the linkage between money supply growth and inflation?," Journal of Asian Economics, Elsevier, vol. 21(6), pages 564-578, December.
  4. Hamori, Shigeyuki & Hamori, Naoko, 2008. "Demand for money in the Euro area," Economic Systems, Elsevier, vol. 32(3), pages 274-284, September.

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