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European Money Demand and the Role of UK for its Stability: A Cointegration Analysis


  • Andreas Beyer

    (University of Copenhagen Institute of Economics)


This paper develops equilibrium correction models for money demand of European-wide monetary aggregates based on a multivariate cointegration analysis. It will be shown that whether or not the UK is a member of the monetary union does not affect the empirical stability of area-wide money demand models. However, there is evidence that the properties of a money demand model for an area that previously did not include UK might change just when the UK will join the union. The models' dynamics and the superexogeneity status of output are different in models that do contain UK in their areas compared with those which do not.

Suggested Citation

  • Andreas Beyer, 1998. "European Money Demand and the Role of UK for its Stability: A Cointegration Analysis," Discussion Papers 98-07, University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:kuiedp:9807

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    References listed on IDEAS

    1. Dudley, Leonard & Montmarquette, Claude, 1976. "A Model of the Supply of Bilateral Foreign Aid," American Economic Review, American Economic Association, vol. 66(1), pages 132-142, March.
    2. Gang, Ira N. & Lehman, James A., 1990. "New directions or not: USAID in Latin America," World Development, Elsevier, vol. 18(5), pages 723-732, May.
    3. McGillivray, M. & White, H., 1993. "Explanatory studies of aid allocation among developing countries : a critical survey," ISS Working Papers - General Series 18942, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    4. Finn Tarp & Mads Váczy Kragh, 1995. "Danish Balance of Payments Support," Discussion Papers 95-16, University of Copenhagen. Department of Economics.
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    Cited by:

    1. 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.
    2. Laura Rinaldi, "undated". "Payment Cards and Money Demand in Belgium," International Economics Working Papers Series ces0116, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, International Economics.

    More about this item


    area-wide European money demand; cointegration; parameter stability; super exogeneity;

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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