Heterogeneity in money holdings across euro area countries: The role of housing

Ralph Setzer, Paul Van den Noord and Guntram Wolff

European Journal of Political Economy, 2011, vol. 27, issue 4, 764-780

Abstract: In this paper we examine why monetary aggregates of euro area Member States have developed differently since the inception of the euro. We derive a money demand equation that incorporates housing wealth and collateral as well as substitution effects on real money holdings. Empirically, we show that cross-country differences in real balances are determined not only by income differences, a standard determinant of money demand, but also by house price developments. Higher house prices and higher user costs of housing are both associated with larger money holdings. Country-specific money holdings are also connected with structural features of the housing market.

Keywords: Money; Housing; National contribution; Euro area (search for similar items in EconPapers)
JEL-codes: E41 E51 E52 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (13)

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Working Paper: Heterogeneity in money holdings across euro area countries: the role of housing (2010)
Working Paper: Heterogeneity in money holdings across euro area countries: The role of housing (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:27:y:2011:i:4:p:764-780

DOI: 10.1016/j.ejpoleco.2011.04.003

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