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Broad Money Demand and Financial Liberalization in Greece

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  • Sunil Sharma
  • 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.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 96/62.

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Length: 55
Date of creation: 01 Jul 1996
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Handle: RePEc:imf:imfwpa:96/62

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Cited by:
  1. Sriram, Subramanian S., 2002. "Determinants and stability of demand for M2 in Malaysia," Journal of Asian Economics, Elsevier, Elsevier, vol. 13(3), pages 337-356.
  2. Ge Wu, 2009. "Broad Money Demand and Asset Substitution in China," IMF Working Papers, International Monetary Fund 09/131, International Monetary Fund.
  3. Nina Budina & Wojtek Maliszewski & Georges de Menil & Geomina Turlea, 2002. "Money, Inflation and output in Romania, 1992-2000," DELTA Working Papers, DELTA (Ecole normale supérieure) 2002-15, DELTA (Ecole normale supérieure).
  4. Wei Liao & Sampawende J.-A. Tapsoba, 2014. "China’s Monetary Policy and Interest Rate Liberalization: Lessons from International Experiences," IMF Working Papers, International Monetary Fund 14/75, International Monetary Fund.
  5. Yannis Panagopoulos & Aristotelis Spiliotis, 2006. "Testing Money Supply Endogeneity: The Case of Greece (1975-1998)," European Research Studies Journal, European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 85-102.
  6. Matei Demetrescu & Helmut L�tkepohl & Pentti Saikkonen, 2009. "Testing for the cointegrating rank of a vector autoregressive process with uncertain deterministic trend term," Econometrics Journal, Royal Economic Society, Royal Economic Society, vol. 12(3), pages 414-435, November.
  7. Khan, Muhammad Arshad & Sajjid, Muhammad Zabir, 2005. "The Exchange Rates and Monetary Dynamics in Pakistan: An Autoregressive Distributed Lag (ARDL) Apporach," MPRA Paper 6752, University Library of Munich, Germany.
  8. Avouyi-Dovi, S. & Diop, A. & Fonteny, E-C. & Gervais, E. & Jacquinot, P. & Mésonnier, J-S. & Sahuc, J-G., 2003. "Estimation d’une fonction de demande de monnaie pour la zone euro : une synthèse des résultats," Bulletin de la Banque de France, Banque de France, Banque de France, issue 111, pages 47-72.
  9. Subramanian S. Sriram, 1999. "Survey of Literatureon Demand for Money," IMF Working Papers, International Monetary Fund 99/64, International Monetary Fund.
  10. Ozge Akinci, 2003. "Modeling the Demand for Currency Issued in Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 3(1), pages 1-25.
  11. Neil R. Ericsson & David F. Hendry & Kevin M. Prestwich, 1997. "The demand for broad money in the United Kingdom, 1878-1993," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 596, Board of Governors of the Federal Reserve System (U.S.).
  12. Maghyereh, Aktham, 2003. "Financial Liberalization and Stability Demand for Money in Emerging Economies: Evidence from Jordan," Applied Econometrics and International Development, Euro-American Association of Economic Development, Euro-American Association of Economic Development, vol. 3(2).
  13. Defne Mutluer & Yasemin Barlas, 2002. "Modeling the Turkish Broad Money Demand," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 2(2), pages 55-75.
  14. Stephen Dobson & Carlyn Ramlogan, 2001. "Money Demand and Economic Liberalization in a Small Open Economy—Trinidad and Tobago," Open Economies Review, Springer, Springer, vol. 12(3), pages 325-339, July.
  15. Mohsen Bahmani-oskooee & Charikleia Economidou, 2005. "How stable is the demand for money in Greece?," International Economic Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 19(3), pages 461-472.
  16. Sanvi Avouyi-Dovi & Françoise Drumetz & Jean-Guillaume Sahuc, 2007. "The money demand function for the Euro area: one step beyond," Documents de recherche, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne 07-08, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
  17. Darrat, Ali F. & Al-Sowaidi, Saif S., 2009. "Financial progress and the stability of long-run money demand: Implications for the conduct of monetary policy in emerging economies," Review of Financial Economics, Elsevier, Elsevier, vol. 18(3), pages 124-131, August.
  18. Christos Karpetis, 2008. "Money, Income and Inflation in Equilibrium – The Case of Greece," International Advances in Economic Research, Springer, Springer, vol. 14(2), pages 205-214, May.
  19. Loizos, Konstantinos & Thompson, John, 2001. "The Demand for Money in Greece 1962 to 1998," MPRA Paper 54035, University Library of Munich, Germany.
  20. Tsionas, Efthymios G., 2001. "P-STAR analysis in a converging economy: the case of Greece," Economic Modelling, Elsevier, Elsevier, vol. 18(1), pages 49-60, January.
  21. Lazea, Valentin & Cozmanca, Bogdan Octavian, 2003. "Currency substitution in Romania," MPRA Paper 19813, University Library of Munich, Germany.

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