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A cointegration model of money and wealth

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  • Assenmacher, Katrin
  • Beyer, Andreas

Abstract

Extending the data set used in Beyer (2009) from 2007 to 2017, we estimate I(1) and I(2) money demand models for euro area M3. We find that the elasticities in the money demand and the real wealth relations identified previously in Beyer (2009) have remained remarkably stable throughout the extended sample period, once only a few additional deterministic variables in the long run relationships for the period after the start of the global financial crisis and the ECB’s non- standard monetary policy measures are included. Testing for price homogeneity in the I(2) model we find that the nominal-to-real transformation is not rejected for the money relation whereas the wealth relation cannot be expressed in real terms. JEL Classification: E41, C32, C22

Suggested Citation

  • Assenmacher, Katrin & Beyer, Andreas, 2020. "A cointegration model of money and wealth," Working Paper Series 2365, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20202365
    Note: 2721763
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. 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.
    3. Jung, Alexander, 2024. "The quantity theory of money, 1870-2020," Working Paper Series 2940, European Central Bank.

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    More about this item

    Keywords

    cointegration; I(2) analysis; money demand; vector error correction model; wealth;
    All these keywords.

    JEL classification:

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

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