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: Suggested Citation
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