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The demand for divisia money in a core monetary union

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  • Katrin Wesche

Abstract

Proponents of an aggregation theoretic approach to money demand argue that simple-sum measures do not capture the theoretical notion of money, especially for broad monetary aggregates. European monetary aggregation, which uses indices for monetary services, seems attractive because these indices can account for the imperfect substitutability between different currencies. In this article, Katrin Wesche applies the aggregation theoretic framework to money holdings of European residents and compares the resulting index to simple-sum M3. She concludes that the Divisia index of European monetary services may provide additional insight into money demand during the period of transition to monetary union.

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Bibliographic Info

Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (1997)
Issue (Month): Sep ()
Pages: 51-60

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Handle: RePEc:fip:fedlrv:y:1997:i:sep:p:51-60

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Keywords: European Central Bank ; European Monetary System (Organization) ; Monetary policy ; Banks and banking; Central;

References

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  1. Richard G. Anderson & Barry Jones & Travis Nesmith, 1996. "Monetary aggregation theory and statistical index numbers," Working Papers 1996-007, Federal Reserve Bank of St. Louis.
  2. Barnett, William A., 1978. "The user cost of money," Economics Letters, Elsevier, vol. 1(2), pages 145-149.
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Citations

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Cited by:
  1. Hayo, Bernd, 1999. "Estimating a European Demand for Money," Scottish Journal of Political Economy, Scottish Economic Society, vol. 46(3), pages 221-44, August.
  2. William A. Barnett, 2004. "Multilateral Aggregation-Theoretic Monetary Aggregation over Heterogeneous Countries," Macroeconomics 0412009, EconWPA.
  3. Reimers, Hans-Eggert, 2002. "Analysing Divisia Aggregates for the Euro Area," Discussion Paper Series 1: Economic Studies 2002,13, Deutsche Bundesbank, Research Centre.
  4. Ivo Arnold, 2003. "A Regional Analysis of German Money Demand Around Reunification with Implications for EMU," Empirica, Springer, vol. 30(1), pages 63-80, March.
  5. Stracca, Livio, 2001. "Does liquidity matter? Properties of a synthetic divisia monetary aggregate in the euro area," Working Paper Series 0079, European Central Bank.
  6. Ivo J.M. Arnold & Casper G. de Vries, 1998. "The EURO, Prudent Coherence?," Tinbergen Institute Discussion Papers 98-070/2, Tinbergen Institute.
  7. Hans-Eggert Reimers, 2003. "Does Money Include Information for Prices in the Euro Area?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 223(5), pages 581-602, September.
  8. Ivo J.M. Arnold & Casper G. de Vries, 1999. "Endogenous Financial Structure and the Transmission of ECB Policy," Tinbergen Institute Discussion Papers 99-021/2, Tinbergen Institute.
  9. Yu, Qiao & Tsui, Albert K., 2000. "Monetary services and money demand in China," China Economic Review, Elsevier, vol. 11(2), pages 134-148, December.
  10. Hans-Eggert Reimers, 2003. "Does Money Include Information for Output in the Euro Area?," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 139(II), pages 231-252, June.

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