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Modelling Money Demand: Further Evidence from an International Comparison

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  • Fredj Jawadi

    ()
    (University of Evry Val d’Essone & Amiens School of Management)

  • Ricardo M. Sousa

    ()
    (Universidade do Minho - NIPE)

Abstract

This paper aims at estimating money demand for the euro area, the US and the UK using a dynamic ordinary least squares estimator (DOLS). Our findings show that: (i) wealth effects on money demand are important in the euro area and the UK; (ii) the impact of changes in the interest rate on real money holdings is negative and small; (iii) goods are a reasonable alternative to money; and (iv) international currency substitution has a major influence on the behaviour of real money demand in the UK.

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Bibliographic Info

Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 23/2012.

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Date of creation: 2012
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Handle: RePEc:nip:nipewp:23/2012

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Postal: Núcleo de Investigação em Políticas Económicas, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal
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Web page: http://www3.eeg.uminho.pt/economia/nipe/versao_inglesa/index_uk.htm
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Keywords: Money demand; dynamic OLS.;

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  1. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May.
  2. James H. Stock & Mark W. Watson, 1991. "A simple estimator of cointegrating vectors in higher order integrated systems," Working Paper Series, Macroeconomic Issues 91-3, Federal Reserve Bank of Chicago.
  3. Ricardo M. Sousa, 2012. "Wealth-to-income ratio and stock returns: evidence from the Euro Area," Applied Economics Letters, Taylor & Francis Journals, vol. 19(7), pages 619-622, May.
  4. Georges Prat & Fredj Jawadi, 2007. "Nonlinear stock prices adjustment in the G7 countries," Working Papers halshs-00172896, HAL.
  5. Ant�nio Afonso & Ricardo M. Sousa, 2012. "The macroeconomic effects of fiscal policy," Applied Economics, Taylor & Francis Journals, vol. 44(34), pages 4439-4454, December.
  6. A. J. Khadaroo, 2003. "A smooth transition regression equation of the demand for UK M0," Applied Economics Letters, Taylor & Francis Journals, vol. 10(12), pages 769-773.
  7. Ricardo M. Sousa, 2014. "Wealth, Asset Portfolio, Money Demand And Policy Rule," Bulletin of Economic Research, Wiley Blackwell, vol. 66(1), pages 95-111, 01.
  8. Duca, John V. & VanHoose, David D., 2004. "Recent developments in understanding the demand for money," Journal of Economics and Business, Elsevier, vol. 56(4), pages 247-272.
  9. Sousa, Ricardo M., 2010. "Housing wealth, financial wealth, money demand and policy rule: Evidence from the euro area," The North American Journal of Economics and Finance, Elsevier, vol. 21(1), pages 88-105, March.
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Cited by:
  1. Fredj Jawadi & Ricardo M. Sousa, 2012. "Money Demand in the euro area, the US and the UK:Assessing the Role of Nonlinearity," NIPE Working Papers 22/2012, NIPE - Universidade do Minho.

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