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Money demand in the euro area: do national differences matter?

Luca Dedola (), Eugenio Gaiotti () and Luca Silipo

No 405, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper assesses the relevance of national information in estimating the demand for euro-area M3 from three perspectives. First, we check whether aggregating national money demands is appropriate. Second, we compare time-series and panel methods to estimate aggregate long-run coefficients. Finally, we investigate the differences among national money demands. We find that the hypothesis of perfect aggregation is not rejected. Nevertheless, some estimates of area-wide long-run parameters are sensitive to the method used to combine national information. We also find that the main difference among individual countries� money demands is their interest elasticity, as well as the existence of country-specific structural breaks.

Keywords: money demand; aggregation; European Central Bank (search for similar items in EconPapers)
JEL-codes: E41 C22 C23 (search for similar items in EconPapers)
Date: 2001-06
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Working Paper: Money Demand in theEuroArea: Do National Differences Matter? (2004) Downloads
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