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Money demand and macroeconomic uncertainty


  • Lemke, Wolfgang
  • Greiber, Claus


In this study we construct a measure of macroeconomic uncertainty from several observable economic indicators for the euro area. Indicator variables are based on financial market data, such as medium-term returns, loss and volatility measures but also come from surveys that capture business and consumer sentiment. From these we estimate the path of underlying macroeconomic uncertainty using an unobserved components model. Employing cointegration analysis it is demonstrated that the extracted measures of uncertainty help to explain the increase in euro area M3 over the period 2001 to 2004. Similar evidence can be found for US monetary aggregates.

Suggested Citation

  • Lemke, Wolfgang & Greiber, Claus, 2005. "Money demand and macroeconomic uncertainty," Discussion Paper Series 1: Economic Studies 2005,26, Deutsche Bundesbank.
  • Handle: RePEc:zbw:bubdp1:4220

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    References listed on IDEAS

    1. Falko Fecht & Kevin X. D. Huang & Antoine Martin, 2008. "Financial Intermediaries, Markets, and Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(4), pages 701-720, June.
    2. Döpke, Jörg & Funke, Michael & Holly, Sean & Weber, Sebastian, 2005. "The cross-sectional dynamics of German business cycles: a bird's eye view," Discussion Paper Series 1: Economic Studies 2005,23, Deutsche Bundesbank.
    3. Hamerle, Alfred & Liebig, Thilo & Scheule, Harald, 2004. "Forecasting Credit Portfolio Risk," Discussion Paper Series 2: Banking and Financial Studies 2004,01, Deutsche Bundesbank.
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    More about this item


    Money demand; Macroeconomic Uncertainty; Excess Liquidity;

    JEL classification:

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

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