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A Stable Model for Euro Area Money Demand: Revisiting the Role of Wealth

Listed author(s):
  • Beyer, Andreas

In this paper we present an empirically stable money demand model for Euro area M3. We show that housing wealth is an important explanatory variable of long-run money demand that captures the trending behaviour of M3 velocity, in particular its shift in the first half of this decade. We show that the current financial crisis has no impact on the stability of our money demand model. JEL Classification: C22, C32, E41

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Paper provided by European Central Bank in its series Working Paper Series with number 1111.

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Date of creation: Nov 2009
Handle: RePEc:ecb:ecbwps:20091111
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  11. Mankiw, N Gregory & Summers, Lawrence H, 1986. "Money Demand and the Effects of Fiscal Policies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(4), pages 415-429, November.
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  17. Mike Artis & Andreas Beyer, 2004. "Issues in Money Demand: The Case of Europe," Journal of Common Market Studies, Wiley Blackwell, vol. 42(4), pages 717-736, November.
  18. Pesaran, M. H. & Smith, Ron P., 1998. "Structural Analysis of Cointegrating VARs," Cambridge Working Papers in Economics 9811, Faculty of Economics, University of Cambridge.
  19. Andreas Beyer, 1998. "Modelling money demand in Germany," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(1), pages 57-76.
  20. de Bondt, Gabe, 2009. "Euro area money demand: empirical evidence on the role of equity and labour markets," Working Paper Series 1086, European Central Bank.
  21. Cassola, Nuno & Morana, Claudio, 2004. "Monetary policy and the stock market in the euro area," Journal of Policy Modeling, Elsevier, vol. 26(3), pages 387-399, April.
  22. Hendry, David F., 1995. "Dynamic Econometrics," OUP Catalogue, Oxford University Press, number 9780198283164.
  23. Carstensen, Kai, 2004. "Is European Money Demand Still Stable?," Kiel Working Papers 1179, Kiel Institute for the World Economy (IfW).
  24. Warne, Anders, 2006. "Bayesian inference in cointegrated VAR models: with applications to the demand for euro area M3," Working Paper Series 692, European Central Bank.
  25. Bruggeman, Annick & Donati, Paola & Warne, Anders, 2003. "Is the demand for euro area M3 stable?," Working Paper Series 255, European Central Bank.
  26. Joaquim Vieira Ferreira Levy & Alessandro Calza & Dieter Gerdesmeier, 2001. "Euro Area Money Demand; Measuring the Opportunity Costs Appropriately," IMF Working Papers 01/179, International Monetary Fund.
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  28. Greiber, Claus & Setzer, Ralph, 2007. "Money and housing: evidence for the euro area and the US," Discussion Paper Series 1: Economic Studies 2007,12, Deutsche Bundesbank, Research Centre.
  29. Ploberger, Werner & Kramer, Walter & Kontrus, Karl, 1989. "A new test for structural stability in the linear regression model," Journal of Econometrics, Elsevier, vol. 40(2), pages 307-318, February.
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