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Money Demand in theEuroArea: Do National Differences Matter?

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Author Info
Luca Dedola (Bank of Italy)
Eugenio Gaiotti (Bank of Italy)
Luca Silipo (Bank of Italy)

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

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Find related papers by JEL classification:
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data

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Full references

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. Giacomo Sbrana, 2008. "On the use of area-wide models in the Euro-zone," Statistical Methods and Applications, Springer, vol. 17(4), pages 499-518, October. [Downloadable!] (restricted)
  2. Tödter, Karl-Heinz, 2002. "Monetary indicators and policy rules in the P-star model," Discussion Paper Series 1: Economic Studies 2002,18, Deutsche Bundesbank, Research Centre. [Downloadable!]
  3. Lauri Kajanoja, 2004. "Money as an indicator variable for monetary policy when money demand is forward looking," Macroeconomics 0405003, EconWPA. [Downloadable!]
  4. Julian Benedict Morgan & Silvia Fabiani, 2003. "Aggregation and euro area Phillips curves," Working Paper Series 213, European Central Bank. [Downloadable!]
  5. Hans-Eggert Reimers, 2003. "Does Money Include Information for Output in the Euro Area?," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 139(II), pages 231-252, June. [Downloadable!]
  6. Reimers, Hans-Eggert, 2002. "Analysing Divisia Aggregates for the Euro Area," Discussion Paper Series 1: Economic Studies 2002,13, Deutsche Bundesbank, Research Centre. [Downloadable!]
  7. Jose Ripoll, 2003. "National Appointments to Multinational Monetary Policy Making: A Role Conflict?," Macroeconomics 0301009, EconWPA. [Downloadable!]
  8. Abelardo Salazar Neaves & Oliver Hossfeld & Jan Hagen & Kai Carstensen, 2008. "Money Demand Stability and Inflation: Prediction in the Four Largest EMU Countries," Kiel Working Papers 1443, Kiel Institute for the World Economy. [Downloadable!]
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  9. Columba, Francesco, 2009. "Narrow money and transaction technology: new disaggregated evidence," MPRA Paper 12689, University Library of Munich, Germany. [Downloadable!]
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  10. Alberto Baffigi & Roberto Golinelli & Giuseppe Parigi, 2002. "Real-time GDP forecasting in the euro area," Temi di discussione (Economic working papers) 456, Bank of Italy, Economic Research Department. [Downloadable!]
  11. Roberto Golinelli & Sergio Pastorello, 2002. "Modelling the demand for M3 in the Euro area," European Journal of Finance, Taylor and Francis Journals, vol. 8(4), pages 371-401, December. [Downloadable!] (restricted)
  12. Kajanoja, Lauri, 2003. "Money as an indicator variable for monetary policy when money demand is forward looking," Research Discussion Papers 9/2003, Bank of Finland. [Downloadable!]
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