Money Demand Stability and Inflation: Prediction in the Four Largest EMU Countries

Abelardo Salazar Neaves, Oliver Hossfeld, Jan Hagen and Kai Carstensen ()

Kiel Working Papers from Kiel Institute for the World Economy

Abstract: In this paper we analyze the money demand functions of the four largest EMU countries and of the four-country (EMU-4) aggregate. We identify reasonable and stable money demand relationships for Germany, France and Spain as well as the EMU-4 aggregate. For the case of Italy, results are less clear. From the estimated money demand functions, we derive both EMU-4 and country-specific measures of money overhang. We find that the EMU-4 overhang measure strongly correlates with the countryspecific measures, particularly since the start of EMU, and is useful to predict country-specific inflation. However, it generally does not encompass country-specific money overhang measures as predictors of inflation. Hence, aggregate money overhang is an important, but by far not an exhaustive, indicator fort he disaggregate level

Keywords: Money demand; stability; money overhang; inflation forecast (search for similar items in EconPapers)
JEL-codes: E41 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-for, nep-mac and nep-mon
Date: 2008-01
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Related works:
Working Paper: Money Demand Stability and Inflation Prediction in the Four Largest EMU Countries (2008)
Journal Article: MONEY DEMAND STABILITY AND INFLATION PREDICTION IN THE FOUR LARGEST EMU COUNTRIES (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:kie:kieliw:1443

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