Real stock prices and the long-run demand for money in Germany
AbstractThe Johansen procedure of cointegration is used to test the hypothesis of a stationary relationship between real money balances, real income, interest rates and real stock prices in Germany for the period 1960-89, and an error correction representation of the data is used to explain the short-run dynamics of the demand for money. Results indicate that: real stock prices have a significant and positive wealth effect on the long-run demand for real M1 balances; there are feedback effects between real money balances and interest rates; and unidirectional Granger-causality runs from real income to interest rates, from interest rates to real stock prices, and from real money balances to real income.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Applied Financial Economics.
Volume (Year): 8 (1998)
Issue (Month): 5 ()
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Web page: http://www.tandf.co.uk/journals/routledge/09603107.html
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