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A money demand system for German M3


  • JØrgen Wolters

    () (Institut fØr Statistik und ãkonometrie, Fachbereich Wirtschaftswissenschaft, Freie UniversitÄt, Boltzmannstr. 20, 14195 Berlin, Germany)

  • Helmut LØtkepohl

    () (Institut fØr Statistik und ãkonometrie, Wirtschaftswissenschaftliche FakultÄt, Humboldt-UniversitÄt, Spandauer Str. 1, 10178 Berlin, Germany)


A small macroeconomic model is constructed starting from a German money demand relation for M3 based on quarterly, seasonally unadjusted data for the period from 1976 to 1996. In contrast to previous studies we build a vector error correction model for M3, GNP, an inflation rate and an interest rate spread variable to represent opportunity costs of holding money. Furthermore, import price inflation is added as an exogenous variable. The model is used to analyze the relation between money growth and inflation by means of an impulse response analysis.

Suggested Citation

  • JØrgen Wolters & Helmut LØtkepohl, 1998. "A money demand system for German M3," Empirical Economics, Springer, vol. 23(3), pages 371-386.
  • Handle: RePEc:spr:empeco:v:23:y:1998:i:3:p:371-386

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    More about this item


    Cointegration analysis · impulse response analysis · monetary policy · money demand · structural vector autoregressive model;

    JEL classification:

    • 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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money


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