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The empirical properties of euro area M3, 1980-2017

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  • Jung, Alexander
  • Carcel Villanova, Hector

Abstract

This paper revisits the empirical properties of euro area M3 over the years 1980 to 2017. We estimate a CVAR model that includes wealth in addition to conventional drivers. Our empirical analysis identifies three long run cointegration relations - one of which can be interpreted as a stable money demand function. We detect that wealth effects coming from movements of stock prices and housing wealth had a positive effect on the long-run money demand for M3 and on output. Moreover, we confirm leading indicator properties of M3 excess liquidity for inflation, in particular at horizons between 1 and 2 years.

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  • Jung, Alexander & Carcel Villanova, Hector, 2020. "The empirical properties of euro area M3, 1980-2017," The Quarterly Review of Economics and Finance, Elsevier, vol. 77(C), pages 37-49.
    • Handle: RePEc:eee:quaeco:v:77:y:2020:i:c:p:37-49
    DOI: 10.1016/j.qref.2020.05.008
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    3. Jung, Alexander, 2024. "The quantity theory of money, 1870-2020," Working Paper Series 2940, European Central Bank.
    4. Ivo J. M. Arnold, 2022. "Monetary overhang in times of covid: evidence from the euro area," Applied Economics, Taylor & Francis Journals, vol. 54(35), pages 4030-4042, July.

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    More about this item

    Keywords

    Financial crisis; Euro area; Housing wealth; Stock prices; I(2) analysis; M3 properties;
    All these keywords.

    JEL classification:

    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising

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