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Currency Substitution and Money Demand in Euroland

  • Miguel Lebre de Freitas

    ()

This papers tests the stability of the demand for money in the euro area in the context of an open economy. A sample consisting of quarterly data covering the 1982:2-1999:3 period is considered. The main finding is that the US long term rate of interest plays a significant role in the European money demand relationship. This result holds for different combinations of variables forming the vector auto-regressive system and suggests that currency substitution vis-à-vis the US dollar may be an important factor influencing the ECB monetary policy.

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File URL: http://hdl.handle.net/10.1007/s11293-006-9016-z
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Article provided by International Atlantic Economic Society in its journal Atlantic Economic Journal.

Volume (Year): 34 (2006)
Issue (Month): 3 (September)
Pages: 275-287

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Handle: RePEc:kap:atlecj:v:34:y:2006:i:3:p:275-287
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