Is the Demand for Euro Area M3 Stable?
By Annick Bruggeman, Paola Donati, Anders Warne. Social Science Research Network, 2003
166 citations recorded by the source corpus.
This paper re-examines two data issues concerning euro area money demand: aggregation of national data and measurement of the own rate. The main purpose is to study if euro area money demand is subject to parameter non-constancies using formal tests rather than informal diagnostics. As a complement to inference based on asymptotics we perform small-scale bootstraps. The empirical evidence supports the existence of a stable long-run relationship between money and output and that the cointegration space is constant over time. However, the interest rate semi-elasticities of money demand are imprecisely estimated. Conditional on the cointegration relations the remaining parameters of the system appear to be constant. We also examine the relevance of stock prices for money demand and find that our measure does not matter for the long-run relations, but may be useful in forecasting exercises. Finally, the conclusions are robust for the aggregation method and the choice of sample.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/7c1762cd94303e316036ccd7078cb2dabb5762c7
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Citations in the corpus
- Liquidity and the Dynamic Pattern of Asset Price Adjustment: A Global View (2010, background): “While Kontolemis (2002) finds a dominant substitution effect in the relationship between money and stock prices, Bruggemann, Donati, and Warne (2003) obtain a prevalent wealth effect.”
- How Important is Money in the Conduct of Monetary Policy (2006, unknown): “Cointegration analysis is similarly used to establish a long-run relationship between euro-area money growth and inflation by Bruggeman et al. (2003) and Kugler and Kaufmann (2005).”
- Assessing excess liquidity in the euro area: the role of sectoral distribution of money (2011, unknown): “…money velocity is given by v t ¼ k̂þ ð1 ’̂Þ yt #̂OCt ð6Þ As y is the logarithm of GDP, the money velocity is declining over time if and only if ’̂4 1, which is consistent with the empirical estimates (Calza et al., 2001; Coenen and Vega, 2001; Bruggeman et al., 2003; Brand and Cassola, 2004).”
- Long-Run Money Demand in the New EU Member States with Exchange Rate Effects (2007, unknown): “The analyses of money-demand functions for the euro area do not contain more than two opportunity-cost variables (see, e.g., Bruggeman et al. 2003; Görgens et al. 2004).”