Currency Substitution and Cross-Border Monetary Aggregation: Evidence From the G-7

Timothy Lane and Stephen Poloz

No 1992/081, IMF Working Papers from International Monetary Fund

Abstract: Is there a stable aggregate money demand relationship for Europe? If so, why, and if not, why not? These questions are important for the implementation of policy by a European central bank, as well as for the appropriate speed of transition to EMU. This paper addresses them in a multi-country empirical study of money demand for the G-7 countries during the period since 1973. It looks for evidence of currency substitution and tests the restrictions implied by cross-border aggregation within Europe.

Keywords: WP; currency substitution; critical value; aggregation restriction; money demand equation; cross-equation restriction; dynamic error correction equation; Canada equation; test statistic; aggregate equation; error correction variable; non-European equation; equation result; currency substitutability; testing equation; Dollarization; Demand for money; Exchange rates; Personal income; Currencies; Europe (search for similar items in EconPapers)
Pages: 36
Date: 1992-10-01
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Citations: View citations in EconPapers (13)

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