The Implications of Cross-Border Monetary Aggregation

Timothy Lane and Jeroen Kremers

No 1992/071, IMF Working Papers from International Monetary Fund

Abstract: Some recent studies suggest the possibility of estimating a stable aggregate demand-for-money relationship for the group of countries participating in the European Monetary System. These results are of particular relevance in connection with the task of setting policy targets for a European Central Bank. This paper uses a theoretical error-invariables framework to identify what is gained and what may be lost through cross-border aggregation of money demand. It provides an analytical basis for such studies, paying particular attention to currency substitution and international portfolio diversification.

Keywords: WP; money demand; aggregate demand; portfolio diversification; disequilibrium money holding; money demand equation; aggregate money demand disturbance; measurement error; Demand for money; Personal income; Dollarization; National income; Currencies (search for similar items in EconPapers)
Pages: 22
Date: 1992-09-01
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