Currency Substitution and Money Demand in Euroland
This paper 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 U.S. dollar long-term interest rate 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 international monetary interdependency may be an important factor influencing the ECB monetary policy. Copyright International Atlantic Economic Society 2006
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Volume (Year): 34 (2006)
Issue (Month): 3 (September)
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