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The Stability of European Money Demand: An Investigation of M3H

  • Katrin Wesche

    ()

The paper assesses the stability and predictive performance of a European money demand function as compared to national money demand functions. With respect to the explanatory accuracy, the national functions perform better than the aggregated function. Examination of the residuals of the national money demand equations indicates that currency substitution is not the major cause for the stability of the aggregated money demand function. The aggregate relation mainly seems to reflect German money demand. This conclusion is supported by the instability of aggregated money demand resulting from the exclusion of Germany from the aggregate. Copyright Kluwer Academic Publishers 1997

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File URL: http://hdl.handle.net/10.1023/A:1008243130051
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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 8 (1997)
Issue (Month): 4 (October)
Pages: 371-391

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Handle: RePEc:kap:openec:v:8:y:1997:i:4:p:371-391
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  1. Martin Falk & Norbert Funke, 1995. "The stability of money demand in Germany and in the EMS: Impact of German unification," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 131(3), pages 470-488, September.
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  3. Hoffman, Dennis L. & Rasche, Robert H. & Tieslau, Margie A., 1995. "The stability of long-run money demand in five industrial countries," Journal of Monetary Economics, Elsevier, vol. 35(2), pages 317-339, April.
  4. Wesche, Katrin, 1996. "Aggregation Bias in Estimating European Money Demand Functions," Discussion Paper Serie B 393, University of Bonn, Germany.
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  13. Angeloni, Ignazio & Cottarelli, Carlo & Levy, Aviram, 1994. "Cross-border deposits, aggregation, and money demand in the transition to EMU," Journal of Policy Modeling, Elsevier, vol. 16(1), pages 27-54, February.
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  16. Jeroen J. M. Kremers & Timothy D. Lane, 1990. "Economic and Monetary Integration and the Aggregate Demand for Money in the EMS," IMF Staff Papers, Palgrave Macmillan, vol. 37(4), pages 777-805, December.
  17. Marianne Schulze-Gattas & Anne Marie Gulde, 1992. "Aggregation of Economic Indicators Across Countries; Exchange Rate versus PPP Based GDP Weights," IMF Working Papers 92/36, International Monetary Fund.
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