The demand for M3 in the euro area

Juan Vega () and Günter Coenen

No 6, Working Paper Series from European Central Bank

Abstract: In this paper, an empirically stable money demand model for M3 in the euro area is constructed. Starting with a multivariate system, three cointegrating relationships with economic content are found: (i) the spread between the long- and the short-term nominal interest rates, (ii) the long-term real interest rate, and (iii) a long-run demand for broad money M3. There is evidence that the determinants of M3 money demand are weakly exogenous with respect to the long-run parameters. Hence, following a general-to-specific modelling approach, a parsimonious conditional error-correction model for M3 money demand is derived which can be interpreted economically. For the conditional model, long-and short-run parameter stability is extensively tested and not rejected. Insights into the dynamics of money demand are gained by means of SVAR techniques exploring the impulse response functions of the cointegrated multivariate system. JEL Classification: C22, C32, E41

Keywords: cointegration; error-correction model; euro area; impulse response analysis; money demand (search for similar items in EconPapers)
Date: 1999-09
Note: 46042
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (142)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp006.pdf (application/pdf)

Related works:
Journal Article: The demand for M3 in the euro area (2001)
Working Paper: The Demand for M3 in the Euro Area (2000)
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:ecb:ecbwps:19996

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().