Money demand and disinflation in selected CEECs during the accession to the EU

Jarko Fidrmuc

Applied Economics, 2009, vol. 41, issue 10, 1259-1267

Abstract: A panel data set for six countries (Czech Republic, Hungary, Poland, Romania, Slovakia and Slovenia) is used to estimate money demand with panel cointegration methods over the recent disinflation period. The basic money demand model is able to convincingly explain the long-run dynamics of M2 in the selected countries. However, money demand is found to have been significantly determined by the euro area interest rates and the exchange rate against the euro, which indicates possible instability of money demand functions in the Central and Eastern European countries. Therefore, direct inflation targeting is an appropriate monetary regime before the eventual adoption of the euro.

Date: 2009
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Working Paper: Money Demand and Disinflation in Selected CEECs during the Accession to the EU (2006)
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DOI: 10.1080/00036840601019323

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