Money and housing: evidence for the euro area and the US

This paper examines the relation between money and housing variables in the euro area and in the US. Our empirical model is based on a standard money demand relation which is augmented by housing market variables. In doing so, co-integrated money demand relationships can be established for both the euro area and the US. Furthermore, we find evidence for asset inflation channels, that is, liquidity fuels housing market developments. --money demand,asset inflation,housing,wealth

Exchange Rate Volatility and Employment Growth: Empirical Evidence from the CEE Economies

According to the traditional 'optimum currency area' approach, not much will be lost from a very hard peg to a currency union if there has been little reason for variations in the exchange rate. This paper takes a different approach and highlights the fact that high exchange rate volatility may as well signal high costs for labor markets. The impact of exchange rate volatility on labor markets in the CEECs is analyzed, finding that volatility vis-à-vis the euro significantly lowers employment growth. Hence, the elimination of exchange rate volatility could be considered as a substitute for a removal of employment protection legislation.Central and Eastern Europe, currency union, euroization, exchange rate variability, job creation

Liquidity and the dynamic pattern of price adjustment: a global view

Global liquidity expansion has been very dynamic since 2001. Contrary to conventional wisdom, high money growth rates have not coincided with a concurrent rise in goods prices. At the same time, however, asset prices have increased sharply, significantly outpacing the subdued development in consumer prices. This paper examines the interactions between money, goods and asset prices at the global level. Using aggregated data for major OECD countries, our VAR results support the view that different price elasticities on asset and goods markets explain the recently observed relative price change between asset classes and consumer goods. --Global liquidity,inflation control,monetary policy transmission,asset prices

Costs of Exchange Rate Volatility for Labour Markets - Empirical Evidence from the CEE Economies

According to the traditional ‘optimum currency area’ approach, little will be lost from a very hard peg to a currency union if there is little reason for using the exchange rate in response to economic shocks. This paper takes a different approach and highlights the fact that high exchange rate volatility may as well signal high costs for labour markets. The impact of exchange rate volatility on labour markets in the CEECs is analysed, finding that volatility vis-à-vis the euro significantly increases unemployment. Hence, the elimination of exchange rate volatility could be considered as a substitute for the removal of employment protection legislation.

Money and housing: Evidence for the euro area and the US

This paper examines the relation between money and housing variables in the euro area and in the US. Our empirical model is based on a standard money demand relation which is augmented by housing market variables. In doing so, co-integrated money demand relationships can be established for both the euro area and the US. Furthermore, we find evidence for asset inflation channels, that is, liquidity fuels housing market developments

Money demand in the euro area: new insights from disaggregated data

Conventional money demand specifications in the euro area have become unstable since 2001. We specify a money demand equation in deviations of individual euro area Member States variables from the euro area average and show that the income elasticity as well as the interest rate semi-elasticity remains stable. The corresponding deep parameters of the utility function have not changed. Aggregate money demand instability does therefore not result from altered standard factors determining the preference for holding money. Instead, other factors determine the aggregate monetary overhang. Since monetary developments cannot easily be explained by changing preferences, they should be closely monitored and might be a sign of imbalances.Money demand, euro area, deep parameters of money demand function, panel data

Money demand in the euro area: new insights from disaggregated data

Conventional money demand specifications in the euro area have become unstable since 2001. We specify a money demand equation in deviations of individual euro area Member States variables from the euro area average and show that the income elasticity as well as the interest rate semi-elasticity remain stable. The corresponding deep parameters of the utility function have not changed. Aggregate money demand instability does therefore not result from altered standard factors determining the preference for holding money. Instead, other factors determine the aggregate monetary overhang. Since monetary developments cannot easily be explained by changing preferences, they should be closely monitored and might be a sign of imbalances.Money demand, M3, national contributions, euro area

Exchange Rate Volatility and Employment Growth: Empirical Evidence from the CEE Economies

According to the traditional 'optimum currency area' approach, not much will be lost from a very hard peg to a currency union if there has been little reason for variations in the exchange rate. This paper takes a different approach and highlights the fact that high exchange rate volatility may as well signal high costs for labor markets. The impact of exchange rate volatility on labor markets in the CEECs is analyzed, finding that volatility vis-à-vis the euro significantly lowers employment growth. Hence, the elimination of exchange rate volatility could be considered as a substitute for a removal of employment protection legislation