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Estimating a European Demand for Money

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  • Bernd Hayo

    (ZEI & University of Bonn)

Abstract

European Monetary Union will come into existence in 1999. This raises questions related to the monetary policy targets that will be adopted by the European Central Bank (ECB). For both likely candidates, targeting a money aggregate or an inflation target, the existence of a stable money demand function at a European level is important. In this paper estimates of such a European money demand for narrow and broad money for the actual 11 EMU countries based on quarterly aggregate data from 1964 to 1994 are presented. It is argued that statistically satisfactory and economically interpretable functions can be found. The robustness of the results is further evaluated using alternative country groups. Moreover, the estimated models appear to be stable over a period of 20 quarters. This raises the hopes that the ECB will face a stable money demand and be able - at least for a certain time - to use past aggregate data for policy purposes.

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File URL: http://128.118.178.162/eps/mac/papers/9811/9811008.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 9811008.

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Length: 32 pages
Date of creation: 26 Nov 1998
Date of revision:
Handle: RePEc:wpa:wuwpma:9811008

Note: Type of Document - PDF-file; prepared on IBM PC ; pages: 32; figures: included
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Web page: http://128.118.178.162

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Keywords: European Money Demand; European Monetary Union; Monetary Policy;

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References

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Cited by:
  1. Hossain, Akhand Akhtar, 2010. "Monetary targeting for price stability in Bangladesh: How stable is its money demand function and the linkage between money supply growth and inflation?," Journal of Asian Economics, Elsevier, vol. 21(6), pages 564-578, December.
  2. Jürgen von Hagen, 2004. "Hat die Geldmenge ausgedient?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 5(4), pages 423-453, November.
  3. Hamori, Shigeyuki & Hamori, Naoko, 2008. "Demand for money in the Euro area," Economic Systems, Elsevier, vol. 32(3), pages 274-284, September.
  4. Arnold, Ivo J. M. & de Vries, Casper G., 2000. "Endogeneity in European money demand," European Journal of Political Economy, Elsevier, vol. 16(4), pages 587-609, November.

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