This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

'All the money in europe?' An investigation of the economic properties of EC-wide extended monetary aggregates

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Carlo Monticelli
Abstract

This paper explores the economic properties of several EC-wide monetary aggregates which are extended to include different measures of cross-border holdings (CBHs). The EC-wide aggregate obtained by simply adding national definitions of broad money is used as a benchmark, since econometric analysis confirms previous findings that it can play a useful role in the coordination of monetary policy at the European level. Cointegration analysis and error-correction modelling in fact show that the demand for it is stable and predictable, with a statistical performance which compares most favourably with national equations. And Granger-causality tests, conducted in both bivariate and multivariate settings for a wide range of specifications, indicate that it has predictive value for both nominal and real Community income. Aggregates including CBHs perform differently according to the definition. "Very broad" measures (which include EC-residents' CBHs kept outside the EC or non-ECresidents' CBHs kept within the EC but denominated in non-EC currencies) are poorly linked with EC-wide income, since they do not pass cointegration tests and do not Granger-cause Community income. In contrast, extended definitions "focused on the EC" (which hinge on the inclusion of CBHs denominated in EC-currencies andlor kept within the EC) are shown to possess the economic properties necessary for money measures to be useful for monetary policy and economic analysis. Although such extended aggregates do not yet outperform the traditional measure of EC-wide broad money, the results suggest that they may shortly become an increasingly important tool for monetary analysis at the EC level.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.bis.org/publ/work19.pdf
File Format: application/pdf
File Function: Full PDF document
Download Restriction: no
File URL: http://www.bis.org/publ/work19.htm
File Format: text/html
File Function:
Download Restriction: no

Publisher Info
Paper provided by Bank for International Settlements in its series BIS Working Papers with number 19.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 50 pages
Date of creation: Oct 1993
Date of revision:
Handle: RePEc:bis:biswps:19

Contact details of provider:
Postal: Centralbahnplatz 2, CH - 4002 Basel
Phone: (41) 61 - 280 80 80
Fax: (41) 61 - 280 91 00
Email:
Web page: http://www.bis.org/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Timo Laurmaa).

Related research
Keywords:

References listed on IDEAS
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. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June. [Downloadable!] (restricted)
  2. McKinnon, Ronald I, 1982. "Currency Substitution and Instability in the World Dollar Standard," American Economic Review, American Economic Association, vol. 72(3), pages 320-33, June. [Downloadable!] (restricted)
  3. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January. [Downloadable!] (restricted)
  4. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March. [Downloadable!] (restricted)
    Other versions:
  5. McCallum, Bennett T., 1983. "A reconsideration of Sims' evidence concerning monetarism," Economics Letters, Elsevier, vol. 13(2-3), pages 167-171. [Downloadable!] (restricted)
  6. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November. [Downloadable!] (restricted)
    Other versions:
  7. Girton, Lance & Roper, Don E, 1981. "Theory and Implications of Currency Substitution," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 13(1), pages 12-30, February. [Downloadable!] (restricted)
  8. Pesaran, M Hashem & Pierse, Richard G & Kumar, Mohan S, 1989. "Econometric Analysis of Aggregation in the Context of Linear Prediction Models," Econometrica, Econometric Society, vol. 57(4), pages 861-88, July. [Downloadable!] (restricted)
    Other versions:
  9. Martin Feldstein & James H. Stock, 1993. "The Use of Monetary Aggregate to Target Nominal GDP," NBER Working Papers 4304, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Timothy D. Lane & Jeroen J. M. Kremers, 1992. "The Implications of Cross-Border Monetary Aggregation," IMF Working Papers 92/71, International Monetary Fund.
  11. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-48, August.
    Other versions:
  12. Timothy D. Lane & Stephen S. Poloz, 1992. "Currency Substitution and Cross-Border Monetary Aggregation: Evidence from the G-7," IMF Working Papers 92/81, International Monetary Fund.
  13. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211. [Downloadable!] (restricted)
  14. Carlo Cottarelli & Ignazio Angeloni & Aviram Levy, 1991. "Cross-Border Deposits and Monetary Aggregates in the Transition to EMU," IMF Working Papers 91/114, International Monetary Fund.
    Other versions:
  15. Schmidt, Peter & Phillips, C B Peter, 1992. "LM Tests for a Unit Root in the Presence of Deterministic Trends," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 257-87, August.
  16. Muscatelli, Vito Antonio & Papi, Luca, 1990. "Cointegration, Financial Innovation and Modelling the Demand for Money in Italy," The Manchester School of Economic & Social Studies, Blackwell Publishing, vol. 58(3), pages 242-59, September.
  17. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-44, January. [Downloadable!] (restricted)
  18. Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-52, September. [Downloadable!] (restricted)
  19. Dolado, Juan J & Jenkinson, Tim & Sosvilla-Rivero, Simon, 1990. " Cointegration and Unit Roots," Journal of Economic Surveys, Blackwell Publishing, vol. 4(3), pages 249-73.
Full references

Statistics
Access and download statistics

Did you know? A tutorial is available.

This page was last updated on 2009-12-17.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.