A Component-Based Analysis Of The Danish Long-Run Money Demand Relation
AbstractThis paper examines the relation between monetary asset components and some of the variables that traditionally enter into aggregate money demand relations. This is done for Danish data within the natural framework of a multivariate econometric model. The purpose of the study is to investigate issues in relation to the level and weighting of a monetary aggregate. We show that within this model it is possible to identify monetary aggregates at different levels of aggregation and that for the narrow aggregate (M1) equal weighting of the components are permitted. For the broader aggregates, (M2) or (M2-M1), equal weighting is no longer appropriate. These findings are not contradictory to what we would expect from aggregation and index number theory. Finally, the overall identifica-tion of the stationary (or long-run) structure points towards a co-existence of a liquid and a less liquid money demand relation which is interpreted as an indication of the possibility of splitting the total money demand relation with respect to different motives for holding money.
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Bibliographic InfoPaper provided by Copenhagen Business School, Department of Economics in its series Working Papers with number 06-1999.
Length: 24 pages
Date of creation: 18 Jul 1999
Date of revision:
Contact details of provider:
Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Phone: 38 15 25 75
Fax: 38 15 34 99
Web page: http://www.cbs.dk/departments/econ/
More information through EDIRC
Monetary asset components; Aggregate money demand; Denmark; Demand relation;
Other versions of this item:
- Lisbeth Funding la Cour, 1995. "A Component® based Analysis of the danish Long-run Money Demand Relation," Discussion Papers 95-18, University of Copenhagen. Department of Economics.
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
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