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Is European Money Demand Still Stable?

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  • Kai Carstensen

Abstract

This paper analyzes the question whether money demand in the Euro area has undergone a structural change in the recent time when M3 money growth has considerably overshot the reference value set by the European Central Bank (ECB). It is found that conventional specifications of money demand have in fact become unstable while specifications which are augmented with equity yields and volatility remain stable. Using such an augmented specification, it turns out that the excessive M3 growth rates can largely be attributed to the stock market downswing and do not put a measurable threat to price stability.

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1179.

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Length: 32 pages
Date of creation: Aug 2003
Date of revision:
Handle: RePEc:kie:kieliw:1179

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References

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Citations

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Cited by:
  1. Ralph Setzer & Guntram Wolff, 2013. "Money demand in the euro area: new insights from disaggregated data," International Economics and Economic Policy, Springer, vol. 10(2), pages 297-315, June.
  2. Benner, Joachim & Carstensen, Kai & Gern, Klaus-Jürgen & Oskamp, Frank & Scheide, Joachim, 2004. "Euroland: Konjunktur verliert wieder an Fahrt," Munich Reprints in Economics 20244, University of Munich, Department of Economics.
  3. Sylvia Kaufmann & Peter Kugler, 2005. "Does Money Matter for Inflation in the Euro Area?," Working Papers 103, Oesterreichische Nationalbank (Austrian Central Bank).
  4. Browne, Frank & Doran, David, 2007. "Addressing Puzzles in Monetary Dynamics," Quarterly Bulletin Articles, Central Bank of Ireland, pages 121-166, October.
  5. Christian Dreger & Jürgen Wolters, 2006. "Investigating M3 Money Demand in the Euro Area: New Evidence Based on Standard Models," Discussion Papers of DIW Berlin 561, DIW Berlin, German Institute for Economic Research.
  6. Benner, Joachim & Carstensen, Kai & Gern, Klaus-Jürgen & Oskamp, Frank & Scheide, Joachim, 2004. "Euroland: Recovery will slow down," Kiel Discussion Papers 415, Kiel Institute for the World Economy (IfW).
  7. Carlos Robalo Marques & Nuno Alves & João Sousa, 2006. "Some Issues Concerning the Use of M3 for Monetary Policy Analysis in the Euro Area," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  8. Sylvia Kaufmann & Peter Kugler, 2006. "Expected Money Growth, Markov Trends and the Instability of Money Demand in the Euro Area," Working Papers 131, Oesterreichische Nationalbank (Austrian Central Bank).
  9. Carstensen, Kai & Gern, Klaus-Jürgen & Kamps, Christophe & Scheide, Joachim, 2003. "Euroland: Stagnation wird allmählich überwunden," Munich Reprints in Economics 19932, University of Munich, Department of Economics.
  10. Nuno Alves & Carlos Robalo Marques & João Sousa, 2007. "Is the euro area M3 abandoning us?," Working Papers w200720, Banco de Portugal, Economics and Research Department.

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