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La fonction de demande de monnaie pour la zone euro : un réexamen


  • Drumetz, F.
  • Avouyi-Dovi, S.
  • Brun, M.
  • Dreyfus, A.
  • Oung, V.
  • Sahuc, J-G.


In recent years, the dynamics of M3 in the euro area have been driven by two factors: a strong preference for liquidity, observed between 2001 and 2003, followed by a normalisation, at a relatively moderate pace, of portfolio behaviour; as regards the counterparts, changes in M3 and net external assets were of comparable magnitude. These factors highlight the role of national and international portfolio shifts in monetary developments. Furthermore, the traditional specifications of the money demand function sometimes yield unsatisfactory results: instability of short and long-term coefficients, relatively large differences between the estimated and actual value of monetary aggregates, and significant changes in the number of long-run relations. Hence the idea of constructing a money demand function that excludes the external counterpart of M3 or, alternatively, introducing financial asset prices in the demand function of M3, as suggested by Friedman (1988). First, the basic equation, based on the quantitative equation of money, was reestimated in order to verify, for example, whether extending the estimation period or revising certain variables would not result in a major change, notably in terms of the stability of the parameters or the number of structural relations. Indeed, this equation exhibits two instabilities (parameters and the number of long-run relations). Similar results are obtained when the external counterpart of M3 is not taken into account. However, by including European share prices, we obtain a substitution effect (significantly negative coefficient) of this variable and a better adjustment, without affecting the two long-run relations (money demand and the Fisher relation) discussed in the article published in Banque de France Monthly Digest No. 113. So, all other things being equal, a decline in European stock market yields would result in a rise in real money holdings and a decrease in the velocity of circulation of money. Equity market develop
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Suggested Citation

  • Drumetz, F. & Avouyi-Dovi, S. & Brun, M. & Dreyfus, A. & Oung, V. & Sahuc, J-G., 2005. "La fonction de demande de monnaie pour la zone euro : un réexamen," Bulletin de la Banque de France, Banque de France, issue 142, pages 23-39.
  • Handle: RePEc:bfr:bullbf:2005:142:01

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    Cited by:

    1. De Santis, Roberto A. & Favero, Carlo A. & Roffia, Barbara, 2013. "Euro area money demand and international portfolio allocation: A contribution to assessing risks to price stability," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 377-404.
    2. Mehrotra, Aaron & Ponomarenko, Alexey, 2010. "Wealth effects and Russian money demand," BOFIT Discussion Papers 13/2010, Bank of Finland, Institute for Economies in Transition.
    3. Bordes, C. & Clerc, L. & Marimoutou, V., 2007. "Is there a structural break in equilibrium velocity in the euro area?," Working papers 165, Banque de France.
    4. Lecarpentier-Moyal, Sylvie & Renou-Maissant, Patricia, 2007. "Analyse dynamique de la convergence des comportements de demande de monnaie en Europe," L'Actualité Economique, Société Canadienne de Science Economique, vol. 83(3), pages 321-357, septembre.
    5. Roberto Santis, 2015. "Quantity theory is alive: the role of international portfolio shifts," Empirical Economics, Springer, vol. 49(4), pages 1401-1430, December.
    6. Andrea Nobili, 2009. "Composite indicators for monetary analysis," Temi di discussione (Economic working papers) 713, Bank of Italy, Economic Research and International Relations Area.

    More about this item


    demande de monnaie; taux intrinsèque; richesse; substitution.;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money


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