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Estimation of a German money demand system - a long-run analysis

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Author Info
Kirstin Hubrich () (Institut f³ur Statistik und ãkonometrie, Humboldt-UniversitÄt zu Berlin, Spandauer Str.1, D-10178 Berlin, Germany)

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Abstract

This study presents a multivariate analysis of the stability of long-run relationships between variables that influence the conduct and transmission process of the German monetary policy. The initial VAR comprises the variables real money M3, real GNP, the inflation rate, a long-term and a weighted short-term interest rate. A multivariate approach has been chosen, as this allows for more than one cointegration relationship and to test restrictions on the cointegration space. In contrast to most other studies on German monetary policy, three stable and economically plausible cointegration relationships are obtained simultaneously within the framework of the Johansen procedure: a money demand relationship, a long-run Fisher effect and a long-run relationship between the short- and the long-term interest rate. It is apparent that the structural break of German reunification can be modelled incorporating dummy variables in the model.

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Publisher Info
Article provided by Springer in its journal Empirical Economics.

Volume (Year): 24 (1999)
Issue (Month): 1 ()
Pages: 77-99
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Handle: RePEc:spr:empeco:v:24:y:1999:i:1:p:77-99

Note: received: October 1996/final version received: July 1997
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Related research
Keywords: Money demand · Fisher effect · interest rate spread · German monetary policy · Johansen procedure;

Find related papers by JEL classification:
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing

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. 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. [Downloadable!] (restricted)
  2. Karen Cabos & Michael Funke & Nikolaus A. Siegfried, 1999. "Some Thoughts on Monetary Targeting vs. Inflation Targeting," Quantitative Macroeconomics Working Papers 19912, Hamburg University, Department of Economics. [Downloadable!]
    Other versions:
  3. Helmut Lütkepohl & Ralf Brüggemann, 2006. "A small monetary system for the euro area based on German data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(6), pages 683-702. [Downloadable!]
    Other versions:
  4. K.S.E.M. Hubrich & P.J.G. Vlaar, 2000. "Germany and the euro area: differences in the transmission process of monetary policy," WO Research Memoranda (discontinued) 613, Netherlands Central Bank, Research Department. [Downloadable!]
    Other versions:
  5. Maghyereh, Aktham, 2003. "Financial Liberalization and Stability Demand for Money in Emerging Economies: Evidence from Jordan," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 3(2). [Downloadable!]
  6. Roberto Golinelli & Sergio Pastorello, 2002. "Modelling the demand for M3 in the Euro area," European Journal of Finance, Taylor and Francis Journals, vol. 8(4), pages 371-401, December. [Downloadable!] (restricted)
  7. Matthias Cinyabuguma & Bernardin Akitoby, 2004. "Sources of Growth in the Democratic Republic of the Congo: A Cointegration Approach," IMF Working Papers 04/114, International Monetary Fund. [Downloadable!]
  8. Karen Cabos & Nikolaus A. Siegfried, 2001. "Controlling Inflation in Euroland," Quantitative Macroeconomics Working Papers 20102, Hamburg University, Department of Economics. [Downloadable!]
    Other versions:
  9. Gerberding, Christina & Seitz, Franz & Worms, Andreas, 2007. "Money-based interest rate rules: lessons from German data," Discussion Paper Series 1: Economic Studies 2007,06, Deutsche Bundesbank, Research Centre. [Downloadable!]
  10. Abelardo Salazar Neaves & Oliver Hossfeld & Jan Hagen & Kai Carstensen, 2008. "Money Demand Stability and Inflation: Prediction in the Four Largest EMU Countries," Kiel Working Papers 1443, Kiel Institute for the World Economy. [Downloadable!]
    Other versions:
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