Money demand in the euro area: new insights from disaggregated data

Ralph Setzer and Guntram Wolff

MPRA Paper from University Library of Munich, Germany

Abstract: Conventional money demand specifications in the euro area have become unstable since 2001. We specify a money demand equation in deviations of individual euro area Member States variables from the euro area average and show that the income elasticity as well as the interest rate semi-elasticity remain stable. The corresponding deep parameters of the utility function have not changed. Aggregate money demand instability does therefore not result from altered standard factors determining the preference for holding money. Instead, other factors determine the aggregate monetary overhang. Since monetary developments cannot easily be explained by changing preferences, they should be closely monitored and might be a sign of imbalances.

Keywords: Money demand; M3; national contributions; euro area (search for similar items in EconPapers)
JEL-codes: E51 E52 E41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac, nep-mon and nep-pke
Date: 2009-03-05
View list of references

Downloads: (external link)
http://mpra.ub.uni-muenchen.de/17483/

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:17483

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany
Address: Schackstr. 4, D-80539 Munich, Germany
Contact information at EDIRC.
Series data maintained by Ekkehart Schlicht ().