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Money Demand and Disinflation in Selected CEECs during the Accession to the EU

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Author Info
Fidrmuc, Jarko

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Abstract

A panel data set for six countries (Czech Republic, Hungary, Poland, Romania, Slovakia, and Slovenia) is used to estimate money demand with panel cointegration methods over the recent disinflation period. The basic money demand model is able to convincingly explain the long-run dynamics of M2 in the selected countries. However, money demand is found to have been significantly determined by the euro area interest rates and the exchange rate against the euro, which indicates possible instability of money demand functions in the CEECs. Therefore, direct inflation targeting is an appropriate monetary regime before the eventual adoption of the euro.

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Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 1232.

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Date of creation: Oct 2006
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Handle: RePEc:lmu:muenec:1232

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Related research
Keywords: Money demand; panel unit root tests; panel cointegration; direct inflation targeting; CEECs;

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Find related papers by JEL classification:
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ruxanda, Gheorghe & Botezatu, Andreea, 2008. "Spurious Regression And Cointegration. Numerical Example: Romania’S M2 Money Demand," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 5(3), pages 51-62, September. [Downloadable!]
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