A cointegration analysis of a money demand system in Europe

Jan Gottschalk

No 902, Kiel Working Papers from Kiel Institute for the World Economy

Abstract: This paper presents a multivariate analysis of a money demand system in Europe. The system comprises real broad money, real GDP, the inflation rate, a long-term and a short-term interest rate. Two stable cointegration vectors can be identified: a money demand function and a long-run Fisher equation. Inflation does not play a role in the specification of the European money demand function. Stability of money demand is generally seen as a precondition for monetary targeting. No suggestive evidence for structural instability is found for long-run money demand. This is of particular relevance for the monetary strategy of the ECB.

Keywords: Money Demand in Europe; European Monetary Union (search for similar items in EconPapers)
JEL-codes: E41 E52 (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:902

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