Money Demand in the Netherlands

Bob Traa

No 1991/057, IMF Working Papers from International Monetary Fund

Abstract: This paper analyzes the demand for narrow money balances in the Netherlands. Demand for narrow money balances had increased markedly in relation to GNP in the Netherlands throughout the 1980s. This phenomenon could not be explained satisfactorily with traditional Goldfeld-type money demand functions which had performed well until that time. Drawing on advances in dynamic modeling from the error corrections and cointegration literature, and incorporating yield-curve effects and the exchange rate of the guilder with the U.S. dollar as additional monetary indicators significantly improves the performance of money demand estimates.

Keywords: WP; money demand; liquidity ratio; deutsche mark; money stock; equation reduction process; money balance; narrow money stock; exchange rate effect; interest cum exchange rate adjustment; money demand function; explanatory variable; money demand indicator; test statistics; dollar money balance; Demand for money; Exchange rates; Short term interest rates; Yield curve; Liquidity management; Global (search for similar items in EconPapers)
Pages: 47
Date: 1991-06-01
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Citations: View citations in EconPapers (7)

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