A Stable Model for Euro Area Money Demand: Revisiting the Role of Wealth

64 Pages Posted: 14 Nov 2009

Date Written: November 11, 2009

Abstract

In this paper we present an empirically stable money demand model for Euro area M3. We show that housing wealth is an important explanatory variable of long-run money demand that captures the trending behaviour of M3 velocity, in particular its shift in the first half of this decade. We show that the current financial crisis has no impact on the stability of our money demand model.

Keywords: Money Demand, Parameter Constancy, Wealth, Cointegration, Vector Error Correction Model

JEL Classification: C22, C32, E41

Suggested Citation

Beyer, Andreas, A Stable Model for Euro Area Money Demand: Revisiting the Role of Wealth (November 11, 2009). ECB Working Paper No. 1111, Available at SSRN: https://ssrn.com/abstract=1499085 or http://dx.doi.org/10.2139/ssrn.1499085

Andreas Beyer (Contact Author)

European Central Bank (ECB) ( email )

Eurotower
Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
+49 69 1344 6468 (Phone)
+44 69 1344 6000 (Fax)

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