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Currency Substitution and Money Demand in Euroland

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  • Miguel Lebre de Freitas

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Abstract

This papers tests the stability of the demand for money in the euro area in the context of an open economy. A sample consisting of quarterly data covering the 1982:2-1999:3 period is considered. The main finding is that the US long term rate of interest plays a significant role in the European money demand relationship. This result holds for different combinations of variables forming the vector auto-regressive system and suggests that currency substitution vis-à-vis the US dollar may be an important factor influencing the ECB monetary policy.

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Bibliographic Info

Article provided by International Atlantic Economic Society in its journal Atlantic Economic Journal.

Volume (Year): 34 (2006)
Issue (Month): 3 (September)
Pages: 275-287

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Handle: RePEc:kap:atlecj:v:34:y:2006:i:3:p:275-287

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Keywords: EMU; money demand; international currencies; currency substitution; E41; E58; F41;

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Cited by:
  1. repec:cto:journl:v:24:y:2004:i:1-2:p:27-40 is not listed on IDEAS
  2. Harrison , Barry & Vymyatnina, Yulia, 2007. "Currency substitution in a de-dollarizing economy: The case of Russia," BOFIT Discussion Papers 3/2007, Bank of Finland, Institute for Economies in Transition.
  3. Leland B. Yeager, 2004. "The Euro Facing Other Moneys," Cato Journal, Cato Journal, Cato Institute, vol. 24(1-2), pages 27-40, Spring/Su.

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