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The Long-Run Demand for M2 Reconsidered

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  • Sophie Altermatt

Abstract

This paper reconsiders the long-run demand for M2 based on a newly con- structed dataset featuring 32 countries since the first half of the 19th century. The evidence from cointegration tests suggests that a long-run equilibrium re- lationship for M2 demand is hardly present. Specifically, only for five countries (Finland, Korea, Mexico, Paraguay and Taiwan) cointegration tests produce strong evidence in favor of a stable long-run money demand. Evidence for Israel and Lebanon is weaker, but still points towards a stable long-run demand for M2. For all other countries evidence speaks against a stable money demand or it is mixed across money demand specifications and/or type of cointegration test.

Suggested Citation

  • Sophie Altermatt, 2018. "The Long-Run Demand for M2 Reconsidered," Diskussionsschriften dp1824, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp1824
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    More about this item

    Keywords

    Money Demand; Velocity; Cointegration;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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