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Money demand in the euro area: do national differences matter?

  • Luca Dedola
  • Eugenio Gaiotti

    ()

    (Bank of Italy, Economic Research Department)

  • Luca Silipo

This paper assesses the relevance of national information in estimating the demand for euro-area M3 from three perspectives. First, we check whether aggregating national money demands is appropriate. Second, we compare time-series and panel methods to estimate aggregate long-run coefficients. Finally, we investigate the differences among national money demands. We find that the hypothesis of perfect aggregation is not rejected. Nevertheless, some estimates of area-wide long-run parameters are sensitive to the method used to combine national information. We also find that the main difference among individual countries� money demands is their interest elasticity, as well as the existence of country-specific structural breaks.

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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 405.

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Date of creation: Jun 2001
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Handle: RePEc:bdi:wptemi:td_405_01
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