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Divisia Aggregates and the Demand for Money in Core EMU

In: Divisia Monetary Aggregates

Author

Listed:
  • Martin M. G. Fase

Abstract

Knowledge of money-holding behaviour in the private sector — that is, households and businesses — is of great importance for assessing the impact of monetary and other shocks on the economy, and the effectiveness of monetary policy. This, together with the fact that the theory of the demand for money is fairly well developed and with the required data readily available, explains why the demand for money has been so well explored econometrically. The underlying thought in all this work has been the belief that money demand should be stable (see Fase 1993, 1994). This chapter follows this research tradition but with a slight shift of emphasis away from econometric techniques and towards the substantial issues of considering various money concepts and geographical areas. Our main concern is the stability of money demand across geographical areas within EMU for various simple-sum versus index number, theory-based aggregates. Of these, the Divisia measure is a prominent example. As to geographical areas, we accept the view that Germany is the anchor country for EMUand should therefore have a relatively stable money demand vis-á-vis other member countries such as the Netherlands.

Suggested Citation

  • Martin M. G. Fase, 2000. "Divisia Aggregates and the Demand for Money in Core EMU," Palgrave Macmillan Books, in: Michael T. Belongia & Jane M. Binner (ed.), Divisia Monetary Aggregates, chapter 7, pages 138-169, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-28823-2_8
    DOI: 10.1057/9780230288232_8
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    Cited by:

    1. Barnett, William A., 2003. "Aggregation-theoretic monetary aggregation over the euro area, when countries are heterogeneous," Working Paper Series 260, European Central Bank.
    2. William A. Barnett, 2011. "Multilateral Aggregation-Theoretic Monetary Aggregation over Heterogeneous Countries," World Scientific Book Chapters, in: Financial Aggregation And Index Number Theory, chapter 6, pages 167-206, World Scientific Publishing Co. Pte. Ltd..
    3. Reimers, Hans-Eggert, 2002. "Analysing Divisia Aggregates for the Euro Area," Discussion Paper Series 1: Economic Studies 2002,13, Deutsche Bundesbank.
    4. Reimers Hans-Eggert, 2003. "Does Money Include Information for Prices in the Euro Area? / Enthält Geld Informationen für die Preisentwicklung im Eurowährungsgebiet?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 223(5), pages 581-602, October.

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