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A Stable Model for Euro Area Money Demand: Revisiting the Role of Wealth

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  • Beyer, Andreas

Abstract

In this paper we present an empirically stable money demand model for Euro area M3. We show that housing wealth is an important explanatory variable of long-run money demand that captures the trending behaviour of M3 velocity, in particular its shift in the first half of this decade. We show that the current financial crisis has no impact on the stability of our money demand model. JEL Classification: C22, C32, E41

Suggested Citation

  • Beyer, Andreas, 2009. "A Stable Model for Euro Area Money Demand: Revisiting the Role of Wealth," Working Paper Series 1111, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20091111
    Note: 336354
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    More about this item

    Keywords

    cointegration; money demand; parameter constancy; Vector Error Correction Model; wealth;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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