Skip to main content
Article thumbnail
Location of Repository

Estimating a European demand for money

By Bernd Hayo


European Monetary Union will come into existence in 1999. This raises questions related to the monetary policy targets that will be adopted by the European Central Bank (ECB). For both likely candidates, targeting a money aggregate or an inflation target, the existence of a stable money demand function at a European level is important. In this paper estimates of such a European money demand for narrow and broad money for the actual 11 EMU countries based on quarterly aggregate data from 1964 to 1994 are presented. It is argued that statistically satisfactory and economically interpretable functions can be found. The robustness of the results is further evaluated using alternative country groups. Moreover, the estimated models appear to be stable over a period of 20 quarters. This raises the hopes that the ECB will face a stable money demand and be able - at least for a certain time - to use past aggregate data for policy purposes. --European Money Demand,Monetary Policy,European Monetary Union

OAI identifier:

Suggested articles


  1. (1993). A European Money Demand Function,
  2. (1973). A Note on Aggregation Biases and Loss,
  3. (1996). Aggregate Money Demand Functions,
  4. (1997). Alternative methodologische Ansätze in der Ökonometrie: Eine Einführung,
  5. (1971). Best Linear Unbiased Interpolation, Distribution, and Extrapolation of Time Series by Related Series,
  6. (1997). Can Monetary Aggregates Play a Role in the Monetary Policy Strategy of the ECB?, Paper presented at the annual Money, Macro and Finance Group conference in
  7. (1992). Cointegration in Partial Systems and the Efficiency of Single-Equation Analysis,
  8. (1991). Critical Values for Cointegration Tests,
  9. (1994). Cross-Border Deposits, Aggregation, and Money Demand in the Transition to EMU,
  10. (1992). Currency Substitution and Cross-Border Monetary Aggregation: Evidence from the G-7, IMF Working Paper No.
  11. Deutsch-Französisches Wirtschaftspolitisches Forum B04-01 The Determination of Unemployment Benefits Rafael
  12. (1997). Die Geldnachfrage für M3: Neue Ergebnisse für das vereinigte Deutschland,
  13. (1989). Econometric Analysis of Aggregation in the Context of Linear Prediction Models,
  14. (1993). Econometrics: Alchemy or Science?,
  15. (1993). Economic Surveys: Germany,
  16. (1991). Empirical Analysis of Macroeconomic Time Series,
  17. (1998). Empirische und theoretische Studien zur Europäischen Währungsunion, Frankfurt: Peter Lang.
  18. (1994). Estimating Equilibrium Exchange Rates,
  19. (1997). EU-Wide Money Demand Functions – A Review of the Empirical Literature, Tijdschrift voor
  20. (1993). Evaluating Dynamic Econometric Models by Encompassing the VAR,
  21. (1994). Financial Innovations, Deregulation, and the ‘Credit View’ of Monetary Policy, Review 76, Federal Reserve Bank of St. Louis,
  22. (1994). In Search for Stability: An Empirical Appraisal of the Demand for Money
  23. (1987). International Evidence on the Demand for Money,
  24. (1960). Is Aggregation Necessarily Bad?,
  25. (1990). Maximum Likelihood Estimation and Inference on Cointegration - With Applications to the Demand for Money,
  26. (1997). Monetary Integration and Currency Substitution in the EMS: The Case for a European Monetary Aggregate,
  27. (1988). Monetary Policy Lessons of Recent Inflation and Disinflation,
  28. (1993). Monetary Union, Money Demand, and Money Supply,
  29. (1997). Money Demand in EU Countries: A Survey, EMI Staff Paper 7, European Monetary Institute,
  30. (1994). No Further Evidence of Wagner’s Law for Mexico,
  31. (1988). Statistical Analysis of Cointegration Vectors,
  32. (1992). Testing Weak Exogeneity and the Order of Cointegration in
  33. (1997). The Demand for Divisia Money in a Core Monetary Union, Review 79, Federal Reserve Bank of St. Louis,
  34. (1992). The Demand for M1 in the USA,
  35. (1992). The Demand for Money
  36. (1993). The Demand for Money, 4th ed.,
  37. (1998). The Euro, Prudent Coherence?, Paper presented at the conference ”Common Money, Uncommon Regions”,
  38. (1994). The Myth of a Stable European Money Demand,
  39. (1995). The Stability of German Money Demand: Tests of the Cointegrating Relation, Weltwirtschaftliches Archiv 131,
  40. (1996). The Stability of the Demand for Money Function in Germany: Myth or Reality?, Zeitschrift für Wirtschafts- und Sozialwissenschaften 116,
  41. (1996). The Standard Error of Regression,
  42. (1998). Welche geldpolitische Strategie für die EZB?,

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.