The (In)stability of Money Demand in the Euro Area: Lessons from a Cross-Country Analysis
AbstractThe instability of standard money demand functions has undermined the role of monetary aggregates for monetary policy analysis in the euro area. This paper uses country-specific monetary aggregates to shed more light on the economics behind the instability of euro area money demand. Our results obtained from panel estimation indicate that the observed instability of standard money demand functions could be explained by omitted variables like e.g. technological progress that are important for money demand but constant across member countries.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2010-023.
Length: 24 pages
Date of creation: Apr 2010
Date of revision:
Money demand; cross-country analysis; panel error correction model; euro area;
Other versions of this item:
- Dieter Nautz & Ulrike Rondorf, 2011. "The (in)stability of money demand in the euro area: lessons from a cross-country analysis," Empirica, Springer, vol. 38(4), pages 539-553, November.
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-24 (All new papers)
- NEP-CBA-2010-04-24 (Central Banking)
- NEP-EEC-2010-04-24 (European Economics)
- NEP-MAC-2010-04-24 (Macroeconomics)
- NEP-MON-2010-04-24 (Monetary Economics)
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