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Money Demand in theEuroArea: Do National Differences Matter?

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  • Luca Dedola

    (Bank of Italy)

  • Eugenio Gaiotti

    (Bank of Italy)

  • Luca Silipo

    (Bank of Italy)

Abstract

This paper assesses the relevance of national information in estimating the demand for euro-area M3 from three perspectives. First, we check whether national money demands can legitimately be aggregated. Second, we compare time-series and panel methods to estimate aggregate long-run coefficients. Finally, we investigate the differences among national money demands. We find that the hypothesis of perfect aggregation is not rejected. Nevertheless, some estimates of area-wide long-run parameters are sensitive to the method used to combine national information. The main difference among individual countries’ money demands is their interest elasticity.

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0404019.

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Date of creation: 24 Apr 2004
Date of revision: 24 Apr 2004
Handle: RePEc:wpa:wuwpma:0404019

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Keywords: money demand; aggregation; European Central Bank.;

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