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The Stability of the Euro-Demand Function

Author

Listed:
  • King Banaian
  • Artatrana Ratha

    () (Department of Economics, St. Cloud State University)

Abstract

While the empirical literature on money demand is vast by any standards, it is relatively silent when it comes to the Euro, a major currency in the world. This hampers efforts, for example, to determine whether or not the European Central Bank can target monetary aggregates for inflation control. The difficulty has come from the lack of information about euro-wide monetary behavior, relying instead on speculative techniques for aggregating country-level data from previous periods of the European exchange rate mechanism. Now that we have six years of monthly data points, we investigate the stability of various Euro-zone monetary aggregates using the Bound Testing Procedure of Cointegration proposed by Pesaran et al. (2001) and study their policy implications.

Suggested Citation

  • King Banaian & Artatrana Ratha, 2007. "The Stability of the Euro-Demand Function," Working Papers 2008-1, Saint Cloud State University, Department of Economics, revised Aug 2007.
  • Handle: RePEc:scs:wpaper:0801
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    File URL: http://repository.stcloudstate.edu/cgi/viewcontent.cgi?article=1012&context=econ_wps
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    References listed on IDEAS

    as
    1. G. Coenen & J.-L. Vega, 2001. "The demand for M3 in the euro area," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(6), pages 727-748.
    2. Adam, Christopher S, 1991. "Financial Innovation and the Demand for LM3 in the UK 1975-86," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 53(4), pages 401-424, November.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    money demand; euro; cointegration;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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