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Currency substitution and money demand in Euroland

  • Miguel Lebre de Freitas


    (Universidade de Aveiro and NIPE)

This papers tests the stability of the demand for money in the euro area in the context of an open economy. A sample consisting of quarterly data covering the 1982:2-1999:3 period is considered. The main finding is that the US long term rate of interest plays a significant role in the European money demand relationship. This result holds for different combinations of variables forming the vector auto-regressive system and suggests that currency substitution vis-à-vis the US dollar may be an important factor influencing the ECB monetary policy.

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Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 11/2003.

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Date of creation: 2003
Date of revision:
Handle: RePEc:nip:nipewp:11/2003
Contact details of provider: Postal: Núcleo de Investigação em Políticas Económicas, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal
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