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Money demand in the euro area: do national differences matter?

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  • Luca Dedola
  • Eugenio Gaiotti

    ()
    (Bank of Italy, Economic Research Department)

  • Luca Silipo

Abstract

This paper assesses the relevance of national information in estimating the demand for euro-area M3 from three perspectives. First, we check whether aggregating national money demands is appropriate. Second, we compare time-series and panel methods to estimate aggregate long-run coefficients. Finally, we investigate the differences among national money demands. We find that the hypothesis of perfect aggregation is not rejected. Nevertheless, some estimates of area-wide long-run parameters are sensitive to the method used to combine national information. We also find that the main difference among individual countriesÂ’ money demands is their interest elasticity, as well as the existence of country-specific structural breaks.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 405.

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Date of creation: Jun 2001
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Handle: RePEc:bdi:wptemi:td_405_01

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Keywords: money demand; aggregation; European Central Bank;

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