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German unification and the demand for German M3

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  • Stefan Gerlach

Abstract

This paper estimates a demand equation for German M3 over the period 1971:1-1989:4, and studies its ability to predict all-German M3 during 1990:l-1992:4 and (a measure of) western German M3 during 1990:l-1994:l. Although the out-of-sample prediction errors appear serially correlated, the equation passes stability tests for the western German data until 1993:4, but rejects in 1994:1. The model fails stability tests for the all-German data, largely because the jump in the money stock at unification is larger than that in nominal GDP. A slight modification of the model estimated using data for the period up to 1990:4 predicts all- German M3 very well in the period 1991:l-1992:4.

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  • Stefan Gerlach, 1994. "German unification and the demand for German M3," BIS Working Papers 21, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:21
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    References listed on IDEAS

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    Cited by:

    1. Ivo Arnold, 2003. "A Regional Analysis of German Money Demand Around Reunification with Implications for EMU," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 30(1), pages 63-80, March.
    2. Wieland, Volker, 2000. "Monetary policy, parameter uncertainty and optimal learning," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 199-228, August.
    3. Norbert Funke, 1997. "Predicting recessions: Some evidence for Germany," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(1), pages 90-102, March.
    4. Svensson, Lars E. O., 1999. "Monetary policy issues for the Eurosystem," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 51(1), pages 79-136, December.
    5. Browne, F.X. & Fagan, G. & Henry, J., 1997. "Money Demand in EU Countries : A Survey," Papers 7, European Monetary Institute.
    6. Gerdesmeier, Dieter, 1996. "Die Rolle des Vermögens in der Geldnachfrage," Discussion Paper Series 1: Economic Studies 1996,05, Deutsche Bundesbank.
    7. Christian Bordes & Hélène Chevrou-Séverac & Vêlayoudom Marimoutou, 2001. "Une Europe monétaire à plusieurs vitesses ? La demande de monnaie dans les grands pays de la zone euro (1979-1999)," Économie et Prévision, Programme National Persée, vol. 147(1), pages 51-71.
    8. Christian Bordes & Hélène Chevrou-Séverac & Velayoudom Marimoutou, 2001. "Une Europe monétaire à plusieurs vitesses ?. La demande de monnaie dans les grands pays de la zone euro (1979-1999)," Economie & Prévision, La Documentation Française, vol. 147(1), pages 51-71.
    9. Renato Filosa, 1995. "Money demand stability and currency substitution in six European countries (1980-1992)," BIS Working Papers 30, Bank for International Settlements.
    10. Scharnagl, Michael, 1996. "Monetary aggregates with special reference to structural changes in the financial markets," Discussion Paper Series 1: Economic Studies 1996,02e, Deutsche Bundesbank.

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