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Real stock prices and the long-run demand for money in Germany

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  • John Thornton

Abstract

The 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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File URL: http://www.tandfonline.com/doi/abs/10.1080/096031098332817
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 8 (1998)
Issue (Month): 5 ()
Pages: 513-517

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Handle: RePEc:taf:apfiec:v:8:y:1998:i:5:p:513-517

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Cited by:
  1. Mansor Ibrhim, 2001. "Financial Factors and the Empirical Behavior of Money Demand: A Case Study of Malaysia," International Economic Journal, Taylor & Francis Journals, vol. 15(3), pages 55-72.
  2. Amir Kia, 2006. "Economic policies and demand for money: evidence from Canada," Applied Economics, Taylor & Francis Journals, vol. 38(12), pages 1389-1407.
  3. Amir Kia, 2002. "Demand for Money, Economic Policies, and Stability," Emory Economics 0211, Department of Economics, Emory University (Atlanta).
  4. Baharumshah, Ahmad Zubaidi & Mohd, Siti Hamizah & Mansur M. Masih, A., 2009. "The stability of money demand in China: Evidence from the ARDL model," Economic Systems, Elsevier, vol. 33(3), pages 231-244, September.
  5. Baharumshah, Ahmad Zubaidi & M. Masih, A. Mansur & Azali, M., 2002. "The stock market and the ringgit exchange rate: a note," Japan and the World Economy, Elsevier, vol. 14(4), pages 471-486, December.

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