Long-Run Money Demand in the New EU Member States with Exchange Rate Effects
Christian Dreger,
Hans-Eggert Reimers and
Barbara Roffia
Eastern European Economics, 2007, vol. 45, issue 2, 75-94
Abstract:
Within a wide range of other economic and financial indicators, money is highly relevant to the two-pillar monetary strategy of the European Central Bank for detecting risks to price stability over the medium term. Money demand models are a natural benchmark for assessing monetary developments. The existence of a well-specified and stable relation between money and prices can be perceived as a prerequisite for using monetary aggregates in the conduct of monetary policy, which is usually assessed within a money-demand framework. In this respect, the present analysis is important for the new member states of the European Union, as they are expected to join the euro area in future years. In this study, a money-demand analysis in the new member states is conducted using panel cointegration methods. A well-behaved long-run money demand relation can be identified only if the exchange rate is included as part of the opportunity cost. In the long-run cointegrating vector, income elasticity exceeds unity. Over the entire sample period, the exchange rate vis-Ã -vis the U.S. dollar turns out to be significant and a more appropriate variable in money demand than is the euro exchange rate.
Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (33)
Downloads: (external link)
http://mesharpe.metapress.com/link.asp?target=contribution&id=Q62XV070G3R2548K (text/html)
Access to full text is restricted to subscribers.
Related works:
Working Paper: Long-run money demand in the new EU Member States with exchange rate effects (2006) 
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: https://EconPapers.repec.org/RePEc:mes:eaeuec:v:45:y:2007:i:2:p:75-94
Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MEEE20
Access Statistics for this article
More articles in Eastern European Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().