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Broad Money Demand and Financial Liberalization in Greece

Sunil Sharma () and Neil Ericsson

No 1996/062, IMF Working Papers from International Monetary Fund

Abstract: This paper develops a constant, data-coherent, error correction model for broad money demand (M3) in Greece. The model contributes to a better understanding of the effects of monetary policy in Greece, and of the portfolio consequences of financial innovation in general. The broad monetary aggregate M3 was targeted until recently, and current Greek monetary policy still uses such aggregates as guidelines, yet analysis of this aggregate has been dormant for over a decade. Inspite of large fluctuations in the inflation rate, introduction of new financial instruments, and liberalization of the financial system, the estimated model is remarkably stable. The dynamics of money demand are important, with price and income elasticities being much smaller in the short run than in the long run.

Keywords: WP; money demand; broad money; rate of return; money demand function; price level; rate of inflation; Treasury bill rate; modeling money demand; money demand equation; demand deposit; constant term; money demand model; money demand relation; Demand for money; Treasury bills and bonds; Monetary base; Inflation; Deposit rates (search for similar items in EconPapers)
Pages: 55
Date: 1996-07-01
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Journal Article: Broad money demand and financial liberalization in Greece (1998) Downloads
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