Modelling Money Demand: Further Evidence from an International Comparison
This paper aims at estimating money demand for the euro area, the US and the UK using a dynamic ordinary least squares estimator (DOLS). Our findings show that: (i) wealth effects on money demand are important in the euro area and the UK; (ii) the impact of changes in the interest rate on real money holdings is negative and small; (iii) goods are a reasonable alternative to money; and (iv) international currency substitution has a major influence on the behaviour of real money demand in the UK.
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