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Estimating Demand for Money within the European Union Area

Author

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  • Hondroyiannis, George

    (Bank of Greece and Department of Home Economics and Ecology Harokopio University)

Abstract

This paper investigates the issues of stability, predictability and interestsensitivity of both the long and short run demand for money within the European Union employing quarterly data over the period 1980-1998. The model is closely based on that estimated by Friedman and Schwartz (1982). The stability of long and short-run money demand within and out of the estimation period is investigated employing a multivariate framework. To test for the existence and the stability of money demand various unit-root pretests and a vector error-correction model are employed. A long-run money demand function is found to exist and the importance of short-run deviations is presented. The empirical evidence suggests the existence of a stable money demand function at a European level both in the long and short-run periods and the policy implications of such a relationship are presented.

Suggested Citation

  • Hondroyiannis, George, 2000. "Estimating Demand for Money within the European Union Area," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 53(3), pages 321-337.
    • Handle: RePEc:ris:ecoint:0239
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    More about this item

    Keywords

    Money Demand; Cointegration; Stability;
    All these keywords.

    JEL classification:

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

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