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The Demand For Money In Austria

  • Bernd Hayo

    (ZEI & University of Bonn)

In this paper, the demand for real money M1, M2 and M3 is estimated for Austria. The modelling takes place within the framework of a small vector autoregression. To estimate the demand for money, two-equation error-correction models are constructed, which contain the short-run dynamics and the long-run economic equilibrium. It is found that a stable money demand exists for all monetary aggregates. The long-run equilibrium of M1, after accounting for a structural break in 1979, can be characterised as a classical type of money demand, with no interest rate effects and a unity elasticity of real GDP. In the case of M2 and M3, we find a unit coefficient on income and a significantly negative influence of an interest rate. The statistical properties of the estimated short-run money demand equations - considering in-sample and out-of-sample (35 observations) tests - are generally very good.

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Paper provided by EconWPA in its series Macroeconomics with number 9902012.

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Date of creation: 25 Feb 1999
Date of revision:
Handle: RePEc:wpa:wuwpma:9902012
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