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Eu-Wide Money And Currency Substitution

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  • Miguel Lebre de Freitas

Abstract

This paper re-addresses the issue of international currency substitution, estimating a money demand equation for the euro-area. The testing procedure accounts for two alternative theories of money demand—the liquidity services model and the portfolio-balance model. The evidence found is favorable to the CS hypothesis in general and to the liquidity services model of money demand in particular. This result, somehow expected, challenges some recent literature on Euro-Area money demand that has been exclusively devoted to the closed economy portfolio-balance model.

Suggested Citation

  • Miguel Lebre de Freitas, 2006. "Eu-Wide Money And Currency Substitution," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(4), pages 48-63, November.
    • Handle: RePEc:icf:icfjmo:v:04:y:2006:i:4:p:48-63
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    More about this item

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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