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The Stability of European Money Demand: An Investigation of M3H

  • Wesche, Katrin

The paper assesses the stability and predictive performance of a European money demand function as compared to national money demand functions. Two different groups of countries for a monetary union are considered. With respect to the explanatory accuracy, the national functions perform better than the aggregated function though the difference is barely significant. 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.

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File URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonsfb/bonsfb337.pdf
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Paper provided by University of Bonn, Germany in its series Discussion Paper Serie B with number 337.

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Length: pages
Date of creation: Nov 1995
Date of revision:
Handle: RePEc:bon:bonsfb:337
Contact details of provider: Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

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  1. Giucca, P. & Levy, A., 1992. "Monetary Aggregates and Monetary Policy Coordination on the Way to Economi c and Monetary Union: The Role of Cross-Border Deposits," Papers 162, Banca Italia - Servizio di Studi.
  2. 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.
  3. Dolado, Juan J & Jenkinson, Tim & Sosvilla-Rivero, Simon, 1990. " Cointegration and Unit Roots," Journal of Economic Surveys, Wiley Blackwell, vol. 4(3), pages 249-73.
  4. Edwards, John B & Orcutt, Guy H, 1969. "Should Aggregation Prior to Estimation Be the Rule?," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 409-20, November.
  5. Campbell, John Y & Shiller, Robert J, 1987. "Cointegration and Tests of Present Value Models," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1062-88, October.
  6. Clive W. J. Granger, 1988. "Aggregation of time series variables-a survey," Discussion Paper / Institute for Empirical Macroeconomics 1, Federal Reserve Bank of Minneapolis.
  7. M. H. Pesaran & R. G. Pierse & M. S. Kumar, 1988. "Econometric Analysis of Aggregation in the Context of Linear Prediction Models," UCLA Economics Working Papers 485, UCLA Department of Economics.
  8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  9. Wesche, Katrin, 1996. "Aggregation Bias in Estimating European Money Demand Functions," Discussion Paper Serie B 393, University of Bonn, Germany.
  10. Timothy D. Lane & Stephen S. Poloz, 1992. "Currency Substitution and Cross-Border Monetary Aggregation; Evidence From the G-7," IMF Working Papers 92/81, International Monetary Fund.
  11. James M. Boughton, 1991. "Long-Run Money Demand in Large Industrial Countries," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 1-32, March.
  12. Bayoumi, Tamim A & Kenen, Peter B, 1993. "How Useful Is an EC-Wide Monetary Aggregate as an Intermediate Target for Europe?," Review of International Economics, Wiley Blackwell, vol. 1(3), pages 209-20, October.
  13. Peter C.B. Phillips & Pierre Perron, 1986. "Testing for a Unit Root in Time Series Regression," Cowles Foundation Discussion Papers 795R, Cowles Foundation for Research in Economics, Yale University, revised Sep 1987.
  14. Monticelli, Carlo & Strauss-Kahn, Marc-Olivier, 1993. "European Integration and the Demand for Broad Money," The Manchester School of Economic & Social Studies, University of Manchester, vol. 61(4), pages 345-66, December.
  15. 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.
  16. 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.
  17. 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.
  18. 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.
  19. Lee, Kevin C & Pesaran, M Hashem & Pierse, Richard G, 1990. "Testing for Aggregation Bias in Linear Models," Economic Journal, Royal Economic Society, vol. 100(400), pages 137-50, Supplemen.
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