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Broad Money Demand and Financial Liberalization in Greece

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  • Mr. Sunil Sharma
  • Mr. Neil R. Ericsson

Abstract

This paper develops a constant, data-coherent, error correction model for broad money demand (M3) in Greece. The model contributes to a better understanding of the effects of monetary policy in Greece, and of the portfolio consequences of financial innovation in general. The broad monetary aggregate M3 was targeted until recently, and current Greek monetary policy still uses such aggregates as guidelines, yet analysis of this aggregate has been dormant for over a decade. Inspite of large fluctuations in the inflation rate, introduction of new financial instruments, and liberalization of the financial system, the estimated model is remarkably stable. The dynamics of money demand are important, with price and income elasticities being much smaller in the short run than in the long run.

Suggested Citation

  • Mr. Sunil Sharma & Mr. Neil R. Ericsson, 1996. "Broad Money Demand and Financial Liberalization in Greece," IMF Working Papers 1996/062, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1996/062
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    References listed on IDEAS

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    More about this item

    Keywords

    WP; money demand; broad money; rate of return; money demand function; price level; rate of inflation; Treasury bill rate; modeling money demand; money demand equation; demand deposit; constant term; money demand model; money demand relation; Demand for money; Treasury bills and bonds; Monetary base; Inflation; Deposit rates;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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