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A small monetary system for the euro area based on German data

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Author Info
Helmut Lütkepohl (European University Institute, Florence, Italy)
Ralf Brüggemann (Humboldt-Universität Berlin, Berlin, Germany)

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Abstract

Previous euro area money demand studies have used aggregated national time series data from the countries participating in the European Monetary Union (EMU). However, aggregation may be problematic because macroeconomic convergence processes have taken place in the countries of interest. Therefore, in this study, quarterly German data until 1998 are combined with data from the euro area from 1999 until 2002 and these series are used for fitting a small vector error correction model for the monetary sector of the EMU. A stable long-run money demand relation is found for the full sample period. Moreover, impulse responses do not change much when the sample period is extended by the EMU period provided the break in the extended data series is captured by a simple dummy variable. Copyright © 2006 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jae.864
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File URL: http://qed.econ.queensu.ca:80/jae/2006-v21.6/
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 21 (2006)
Issue (Month): 6 ()
Pages: 683-702
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Handle: RePEc:jae:japmet:v:21:y:2006:i:6:p:683-702

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Holmes, Mark J, 2002. "Panel Data Evidence on Inflation Convergence in the European Union," Applied Economics Letters, Taylor and Francis Journals, vol. 9(3), pages 155-58, February. [Downloadable!] (restricted)
  2. M. Lanne & H. Lütkepohl & P. Saikkonen, . "Comparison of Unit Root Tests for Time Series with Level Shifts," Sonderforschungsbereich 373 1999-88, Humboldt Universitaet Berlin.
  3. Beyer, Andreas & Doornik, Jurgen A & Hendry, David F, 2001. "Constructing Historical Euro-Zone Data," Economic Journal, Royal Economic Society, vol. 111(469), pages F102-21, February. [Downloadable!] (restricted)
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  4. Gabriel Fagan & JÊrÆme Henry, 1998. "Long run money demand in the EU: Evidence for area-wide aggregates," Empirical Economics, Springer, vol. 23(3), pages 483-506. [Downloadable!] (restricted)
  5. Kocenda, Evzen & Papell, David H, 1997. "Inflation Convergence within the European Union: A Panel Data Analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(3), pages 189-98, July. [Downloadable!] (restricted)
  6. Beine, Michel & Hecq, Alain, 1998. "Codependence and Convergence in the EC Economies," Journal of Policy Modeling, Elsevier, vol. 20(4), pages 403-426, August. [Downloadable!] (restricted)
  7. Benkwitz, Alexander & Lütkepohl, Helmut & Wolters, Jürgen, 1999. "Comparison of Bootstrap Confidence Intervals for Impulse Responses of German Monetary Systems," CEPR Discussion Papers 2208, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  8. Claus Brand & Nuno Cassola, 2000. "A money demand system for Euro area M3," Working Paper Series 39, European Central Bank. [Downloadable!]
  9. Ralf BRUEGGEMANN & Helmut LUETKEPOHL & Pentti SAIKKONEN, 2004. "Residual Autocorrelation Testing for Vector Error Correction Models," Economics Working Papers ECO2004/08, European University Institute. [Downloadable!]
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  10. Ralf BRUEGGEMANN & Helmut LUETKEPOHL, 2004. "Practical Problems with Reduced Rank ML Estimators for Cointegration Parameters and a Simple Alternative," Economics Working Papers ECO2004/20, European University Institute. [Downloadable!]
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  11. Luetkepohl, Helmut & Wolters, Juergen, 2001. "The Transmission of German Monetary Policy in the Pre-Euro Period," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  12. Kai Carstensen, 2003. "Is European Money Demand Still Stable?," Kiel Working Papers 1179, Kiel Institute for the World Economy. [Downloadable!]
  13. Michael Scharnagl, 1998. "The stability of German money demand: Not just a myth," Empirical Economics, Springer, vol. 23(3), pages 355-370. [Downloadable!] (restricted)
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  15. repec:cup:macdyn:v:5:y:2001:i:1:p:81-100 is not listed on IDEAS
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  17. repec:cup:macdyn:v:7:y:2003:i:5:p:711-33 is not listed on IDEAS
  18. Annick Bruggeman & Paola Donati & Anders Warne, 2003. "Is the demand for Euro area M3 stable?," Working Paper Series 255, European Central Bank. [Downloadable!]
  19. L Tkepohl, Helmut & Wolters, J Rgen, 2003. "Transmission Of German Monetary Policy In The Pre-Euro Period," Macroeconomic Dynamics, Cambridge University Press, vol. 7(05), pages 711-733, November. [Downloadable!]
  20. Katarina Juselius, 1998. "Changing monetary transmission mechanisms within the EU," Empirical Economics, Springer, vol. 23(3), pages 455-481. [Downloadable!] (restricted)
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  21. Imke Brüggemann, 2003. "Measuring Monetary Policy in Germany: A Structural Vector Error Correction Approach," German Economic Review, Blackwell Publishing, vol. 4, pages 307-339, 08. [Downloadable!] (restricted)
  22. Saikkonen, Pentti & Lutkepohl, Helmut, 2000. "Testing for the Cointegrating Rank of a VAR Process with Structural Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(4), pages 451-64, October.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Vladimir Kuzin & Massimiliano Marcellino & Christian Schumacher, 2009. "Pooling versus Model Selection for Nowcasting with Many Predictors: An Application to German GDP," Economics Working Papers ECO2009/13, European University Institute. [Downloadable!]
    Other versions:
  2. Edda Claus & Mardi Dungey & Renée Fry, 2008. "Monetary Policy in Illiquid Markets: Options for a Small Open Economy," Open Economies Review, Springer, vol. 19(3), pages 305-336, July. [Downloadable!] (restricted)
    Other versions:
  3. Christian Dreger & Jürgen Wolters, 2008. "M3 Money Demand and Excess Liquidity in the Euro Area," Working Paper / FINESS 7.1a, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  4. Marcellino, Massimiliano & Schumacher, Christian, 2008. "Factor-MIDAS for now- and forecasting with ragged-edge data: A model comparison for German GDP," CEPR Discussion Papers 6708, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Christian Dreger & Jürgen Wolters, 2008. "Money Velocity and Asset Prices in the Euro Area," Working Paper / FINESS 7.1b, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  6. Ralf Brüggemann & Helmut Lütkepohl & Massimiliano Marcellino, 2006. "Forecasting Euro-Area Variables with German Pre-EMU Data," SFB 649 Discussion Papers SFB649DP2006-065, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
    Other versions:
  7. Sinchan Mitra & Tara M. Sinclair, . "Output Fluctuations in the G-7: An Unobserved Components Approach," MRG Discussion Paper Series 2509, School of Economics, University of Queensland, Australia. [Downloadable!]
  8. Elena Angelini & Massimiliano Marcellino, 2007. "Econometric analyses with backdated data - unified Germany and the euro area," Working Paper Series 752, European Central Bank. [Downloadable!]
  9. Heather Anderson & Mardi Dungey & Denise Osborn & Farshid Vahid, 2007. "Constructing Historical Euro Area Data," Money Macro and Finance (MMF) Research Group Conference 2006 99, Money Macro and Finance Research Group. [Downloadable!]
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  10. Aaron Mehrotra, 2008. "Demand for Money in Transition: Evidence from China’s Disinflation," International Advances in Economic Research, Springer, vol. 14(1), pages 36-47, February. [Downloadable!] (restricted)
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  11. Ralf Brueggemann & Helmut Luetkepohl, 2005. "Uncovered Interest Rate Parity and the Expectations Hypothesis of the Term Structure: Empirical Results for the U.S. and Europe," Economics Working Papers ECO2005/08, European University Institute. [Downloadable!]
    Other versions:
  12. Helmut Luetkepohl, 2009. "Forecasting Aggregated Time Series Variables: A Survey," Economics Working Papers ECO2009/17, European University Institute. [Downloadable!]
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