German unification and the demand for German M3

Stefan Gerlach ()

No 21, BIS Working Papers from Bank for International Settlements

Abstract: This paper estimates a demand equation for German M3 over the period 1971:1-1989:4, and studies its ability to predict all-German M3 during 1990:l-1992:4 and (a measure of) western German M3 during 1990:l-1994:l. Although the out-of-sample prediction errors appear serially correlated, the equation passes stability tests for the western German data until 1993:4, but rejects in 1994:1. The model fails stability tests for the all-German data, largely because the jump in the money stock at unification is larger than that in nominal GDP. A slight modification of the model estimated using data for the period up to 1990:4 predicts all- German M3 very well in the period 1991:l-1992:4.

Pages: 28 pages
Date: 1994-09
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Citations: View citations in EconPapers (12)

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