IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Household money holdings in the euro area: An explorative investigation

Listed author(s):
  • Seitz, Franz
  • von Landesberger, Julian

In this paper we analyse household holdings of the broad monetary aggregate M3 in the euro area from 1991 until 2009. We develop four models, two in nominal, two in real terms, with satisfactory economic and statistical properties. The main determinants are a transactions variable, wealth considerations, opportunity costs and uncertainty. The models are robust to different estimation strategies, samples considered and a multitude of mis-specification tests. The exercise also provides insights that go beyond the portfolio allocation decision of households. According to our analysis, it is quite apparent that in equilibrium, households jointly determine consumption and broad money holdings both influenced by wealth as well as interest rates. JEL Classification: E41, C23, C32, D21

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1238.pdf
Download Restriction: no

Paper provided by European Central Bank in its series Working Paper Series with number 1238.

as
in new window

Length:
Date of creation: Sep 2010
Handle: RePEc:ecb:ecbwps:20101238
Contact details of provider: Postal:
60640 Frankfurt am Main, Germany

Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Zenon Kontolemis, 2002. "Money Demand in the Euro Area; Where Do We Stand (Today)?," IMF Working Papers 02/185, International Monetary Fund.
  2. Lemke, Wolfgang & Greiber, Claus, 2005. "Money demand and macroeconomic uncertainty," Discussion Paper Series 1: Economic Studies 2005,26, Deutsche Bundesbank, Research Centre.
  3. Fiess, Norbert & MacDonald, Ronald, 2001. " The Instability of the Money Demand Function: An I(2) Interpretation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(4), pages 475-495, September.
  4. von Landesberger, Julian, 2007. "Sectoral money demand models for the euro area based on a common set of determinants," Working Paper Series 0741, European Central Bank.
  5. Beyer, Andreas, 2009. "A Stable Model for Euro Area Money Demand: Revisiting the Role of Wealth," Working Paper Series 1111, European Central Bank.
  6. Chadha, Jagjit S & Haldane, Andrew G & Janssen, Norbert G J, 1998. "Shoe-Leather Costs Reconsidered," Economic Journal, Royal Economic Society, vol. 108(447), pages 363-382, March.
  7. Carmen Martínez-Carrascal & Julian von Landesberger, 2010. "Explaining the demand for money by non-financial corporations in the euro area: A macro and a micro view," Working Papers 1033, Banco de España;Working Papers Homepage.
  8. James G. MacKinnon & Alfred A. Haug & Leo Michelis, 1996. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Working Papers 1996_07, York University, Department of Economics.
  9. Joseph Atta-Mensah, 2004. "Money Demand and Economic Uncertainty," Staff Working Papers 04-25, Bank of Canada.
  10. Timo Teräsvirta & Ann-Charlotte Eliasson, 2001. "Non-linear error correction and the UK demand for broad money, 1878-1993," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 277-288.
  11. Detken, Carsten & Smets, Frank, 2004. "Asset price booms and monetary policy," Working Paper Series 0364, European Central Bank.
  12. Gunter Coenen & Juan Luis Vega, 2000. "The Demand for M3 in the Euro Area," Econometric Society World Congress 2000 Contributed Papers 0976, Econometric Society.
  13. Alessandro Calza & Andrea Zaghini, 2010. "Sectoral Money Demand and the Great Disinflation in the United States," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(8), pages 1663-1678, December.
  14. James G. MacKinnon, 1995. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Working Papers 918, Queen's University, Department of Economics.
  15. Thórarinn G. Pétursson, 2001. "The representative household's demand for money in a cointegrated VAR model," Economics wp12, Department of Economics, Central bank of Iceland.
  16. Orazio Attanasio & Luigi Guiso & Tullio Jappelli, 1998. "The Demand for Money, Financial Innovation, and the Welfare Cost of Inflation: An Analysis with Households' Data," CSEF Working Papers 03, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  17. Hiroshi Fujiki and Cheng Hsiao, 2008. "Aggregate and Household Demand for Money: Evidence from the Public Opinion Survey on Household Financial Assets and Liabilities," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 26, pages 159-194, December.
  18. Livio Stracca, 2003. "The Functional Form Of The Demand For Euro Area M1," Manchester School, University of Manchester, vol. 71(2), pages 172-204, 03.
  19. Neil R. Ericsson, 1998. "Empirical modeling of money demand," Empirical Economics, Springer, vol. 23(3), pages 295-315.
  20. Tin, Jan, 2008. "An empirical examination of the inventory-theoretic model of precautionary money demand," Economics Letters, Elsevier, vol. 99(1), pages 204-205, April.
  21. K Alec Chrystal & Paul Mizen, 2001. "Consumption, money and lending: a joint model for the UK household sector," Bank of England working papers 134, Bank of England.
  22. 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.
  23. Kilian, Lutz, 2001. "Impulse Response Analysis in Vector Autoregressions with Unknown Lag Order," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 20(3), pages 161-179, April.
  24. Park, Joon, 2002. "Bootstrap Unit Root Tests," Working Papers 2003-04, Rice University, Department of Economics.
  25. Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-328, August.
  26. Chang, Yoosoon & Park, Joon & Song, Kevin, 2002. "Bootstrapping Cointegrating Regressions," Working Papers 2002-04, Rice University, Department of Economics.
  27. Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679.
  28. 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.
  29. Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
  30. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
  31. Eugene Fama & F. & Kenneth R. French, "undated". "The Equity Premium."," CRSP working papers 522, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  32. Alessandro Calza & Andrea Zaghini, 2011. "Sectoral money demand and the great disinflation in the US," Temi di discussione (Economic working papers) 785, Bank of Italy, Economic Research and International Relations Area.
  33. Butkiewicz, James L. & McConnell, Margaret Mary, 1995. "The stability of the demand for money and M1 velocity: Evidence from the sectoral data," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(3), pages 233-243.
  34. Robert E. Lucas, Jr., 2000. "Inflation and Welfare," Econometrica, Econometric Society, vol. 68(2), pages 247-274, March.
  35. Read, Vicky, 1996. "Sectoral disaggregation of German M3," Discussion Paper Series 1: Economic Studies 1996,01, Deutsche Bundesbank, Research Centre.
  36. Collins, Sean & Anderson, Richard, 1998. "Modeling U.S. Households' Demands for Liquid Wealth in an Era of Financial Change," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(1), pages 83-101, February.
  37. Jain, Parul & Moon, Choon-Geol, 1994. "Sectoral Money Demand: A Co-integration Approach," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 196-202, February.
  38. Stern Liliana V & Stern Michael L., 2008. "Expected Equity Returns and the Demand for Money," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-29, June.
  39. Friedman, Milton, 1988. "Money and the Stock Market," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 221-245, April.
  40. Martinez-Carrascal, Carmen & von Landesberger, Julian, 2010. "Explaining the money demand of non-financial corporations in the Euro area: A macro and a micro view," Working Paper Series 1257, European Central Bank.
  41. Anders Rygh Swensen, 2006. "Bootstrap Algorithms for Testing and Determining the Cointegration Rank in VAR Models -super-1," Econometrica, Econometric Society, vol. 74(6), pages 1699-1714, November.
  42. 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.
  43. Warne, Anders, 2006. "Bayesian inference in cointegrated VAR models: with applications to the demand for euro area M3," Working Paper Series 0692, European Central Bank.
  44. Hiroshi Fujiki & Cheng Hsiao, 2013. "Aggregate and Household Demand for Money: Evidence from Public Opinion Survey on Household Financial Assets and Liabilities," WISE Working Papers 2013-10-14, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
  45. Ryland Thomas, 1997. "The Demand for M4: A Sectoral Analysis. Part 1 - The Personal Sector," Bank of England working papers 61, Bank of England.
  46. Tarun Chordia & Lakshmanan Shivakumar, 2002. "Momentum, Business Cycle, and Time-varying Expected Returns," Journal of Finance, American Finance Association, vol. 57(2), pages 985-1019, 04.
  47. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
  48. Laurence Boone & Paul Noord, 2008. "Wealth effects on money demand in the euro area," Empirical Economics, Springer, vol. 34(3), pages 525-536, June.
  49. Adalid, Ramón & Detken, Carsten, 2007. "Liquidity shocks and asset price boom/bust cycles," Working Paper Series 0732, European Central Bank.
  50. Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
  51. Andrew Brigden & Paul Mizen, 1999. "Money, credit and investment in UK corporate sector," Bank of England working papers 100, Bank of England.
  52. Carstensen, Kai, 2006. "Stock Market Downswing and the Stability of European Monetary Union Money Demand," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 395-402, October.
  53. Stephen M. Goldfeld, 1973. "The Demand for Money Revisited," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(3), pages 577-646.
  54. Joseph Atta-Mensah, 2004. "The Demand for Money in a Stochastic Environment," Staff Working Papers 04-7, Bank of Canada.
  55. Peter C. B. Phillips & Bruce E. Hansen, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Oxford University Press, vol. 57(1), pages 99-125.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20101238. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Official Publications)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.