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A Small Monetary System for the Euro Area Based on German Data

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Ralf Brueggemann
Helmut Luetkepohl

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Abstract

Previous euro area money demand studies have used aggregated national time series data from the countries participating in the European Monetary Union (EMU). However, aggregation may be problematic because macroeconomic convergence processes have taken place in the countries of interest. Therefore, in this study, quarterly German data until 1998 are combined with data from the euro area from 1999 until 2002 and these series are used for getting a small vector error correction model for the monetary sector of the EMU. A stable long-run money demand relation is found for the full sample period. Moreover, impulse responses do not change much when the sample period is extended by the EMU period provided the break in the extended data series is captured by a simple dummy variable.

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Paper provided by European University Institute in its series Economics Working Papers with number ECO2004/24.

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Date of creation: 2004
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Handle: RePEc:eui:euiwps:eco2004/24

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C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models

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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. Holmes, Mark J, 2002. "Panel Data Evidence on Inflation Convergence in the European Union," Applied Economics Letters, Taylor and Francis Journals, vol. 9(3), pages 155-58, February. [Downloadable!] (restricted)
  2. M. Lanne & H. Lütkepohl & P. Saikkonen, . "Comparison of Unit Root Tests for Time Series with Level Shifts," Sonderforschungsbereich 373 1999-88, Humboldt Universitaet Berlin.
  3. Gabriel Fagan & JÊrÆme Henry, 1998. "Long run money demand in the EU: Evidence for area-wide aggregates," Empirical Economics, Springer, vol. 23(3), pages 483-506. [Downloadable!] (restricted)
  4. Kocenda, Evzen & Papell, David H, 1997. "Inflation Convergence within the European Union: A Panel Data Analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(3), pages 189-98, July. [Downloadable!] (restricted)
  5. Beine, Michel & Hecq, Alain, 1998. "Codependence and Convergence in the EC Economies," Journal of Policy Modeling, Elsevier, vol. 20(4), pages 403-426, August. [Downloadable!] (restricted)
  6. Claus Brand & Nuno Cassola, 2000. "A money demand system for Euro area M3," Working Paper Series 39, European Central Bank. [Downloadable!]
  7. Ralf BRUEGGEMANN & Helmut LUETKEPOHL & Pentti SAIKKONEN, 2004. "Residual Autocorrelation Testing for Vector Error Correction Models," Economics Working Papers ECO2004/08, European University Institute. [Downloadable!]
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  8. Ralf BRUEGGEMANN & Helmut LUETKEPOHL, 2004. "Practical Problems with Reduced Rank ML Estimators for Cointegration Parameters and a Simple Alternative," Economics Working Papers ECO2004/20, European University Institute. [Downloadable!]
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  9. Luetkepohl, Helmut & Wolters, Juergen, 2001. "The Transmission of German Monetary Policy in the Pre-Euro Period," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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  10. Kai Carstensen, 2003. "Is European Money Demand Still Stable?," Kiel Working Papers 1179, Kiel Institute for the World Economy. [Downloadable!]
  11. Michael Scharnagl, 1998. "The stability of German money demand: Not just a myth," Empirical Economics, Springer, vol. 23(3), pages 355-370. [Downloadable!] (restricted)
  12. Kirstin Hubrich, 1999. "Estimation of a German money demand system - a long-run analysis," Empirical Economics, Springer, vol. 24(1), pages 77-99. [Downloadable!] (restricted)
  13. repec:cup:macdyn:v:5:y:2001:i:1:p:81-100 is not listed on IDEAS
  14. Roberto Golinelli & Sergio Pastorello, 2002. "Modelling the demand for M3 in the Euro area," European Journal of Finance, Taylor and Francis Journals, vol. 8(4), pages 371-401, December. [Downloadable!] (restricted)
  15. repec:cup:macdyn:v:7:y:2003:i:5:p:711-33 is not listed on IDEAS
  16. Annick Bruggeman & Paola Donati & Anders Warne, 2003. "Is the demand for Euro area M3 stable?," Working Paper Series 255, European Central Bank. [Downloadable!]
  17. Katarina Juselius, 1998. "Changing monetary transmission mechanisms within the EU," Empirical Economics, Springer, vol. 23(3), pages 455-481. [Downloadable!] (restricted)
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  18. Imke Brüggemann, 2003. "Measuring Monetary Policy in Germany: A Structural Vector Error Correction Approach," German Economic Review, Blackwell Publishing, vol. 4, pages 307-339, 08. [Downloadable!] (restricted)
  19. Saikkonen, Pentti & Lutkepohl, Helmut, 2000. "Testing for the Cointegrating Rank of a VAR Process with Structural Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(4), pages 451-64, October.
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Cited by:
(explanations, 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. Massimiliano Marcellino & Christian Schumacher, . "Factor-MIDAS for Now- and Forecasting with Ragged-Edge Data: A Model Comparison for German GDP1," Working Papers 333, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
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  2. Elena Angelini & Massimiliano Marcellino, 2007. "Econometric analyses with backdated data - unified Germany and the euro area," Working Paper Series 752, European Central Bank. [Downloadable!]
  3. Heather Anderson & Mardi Dungey & Denise Osborn & Farshid Vahid, 2007. "Constructing Historical Euro Area Data," Money Macro and Finance (MMF) Research Group Conference 2006 99, Money Macro and Finance Research Group. [Downloadable!]
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  4. Ralf Brueggemann & Helmut Luetkepohl, 2005. "Uncovered Interest Rate Parity and the Expectations Hypothesis of the Term Structure: Empirical Results for the U.S. and Europe," Economics Working Papers ECO2005/08, European University Institute. [Downloadable!]
    Other versions:
  5. Ralf Brüggemann & Helmut Lütkepohl & Massimiliano Marcellino, 2006. "Forecasting Euro-Area Variables with German Pre-EMU Data," SFB 649 Discussion Papers SFB649DP2006-065, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
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  6. Edda Claus & Mardi Dungey & Renee Fry, 2006. "Monetary Policy In Illiquid Markets: Options For A Small Open Economy," CAMA Working Papers 2006-17, Australian National University, Centre for Applied Macroeconomic Analysis. [Downloadable!]
    Other versions:
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