Money Demand Stability and Inflation Prediction in the Four Largest EMU Countries

Arbeitspapier

In this paper we analyze the money demand functions of the four largest EMU countriesand of the four-country (EMU-4) aggregate. We identify reasonable and stable moneydemand relationships for Germany, France and Spain as well as the EMU-4 aggregate.For the case of Italy, results are less clear. From the estimated money demand functions,we derive both EMU-4 and country-specific measures of money overhang. We find thatthe EMU-4 overhang measure strongly correlates with the country-specific measures,particularly since the start of EMU, and is useful to predict country-specific inflation.However, it generally does not encompass country-specific money overhang measuresas predictors of inflation. Hence, aggregate money overhang is an important, but by farnot an exhaustive, indicator for the disaggregate level.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ifo Working Paper ; No. 61

Classification and Topics

• Classification: Wirtschaft ; Demand for Money ; Monetary Policy
• Subject: Money demand ; stability ; money overhang ; inflation forecast ; Geldnachfrage ; Schätzung ; Geldmenge ; Monetärer Indikator ; Inflation ; Europäische Wirtschafts- und Währungsunion ; Deutschland ; Frankreich ; Spanien ; Italien

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Carstensen, Kai ; Hagen, Jan ; Hossfeld, Oliver ; Salazar Neaves, Abelardo
• Event: Veröffentlichung
• (who): ifo Institute - Leibniz Institute for Economic Research at the University of Munich
• (where): Munich
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/73770
• Last update: 10.03.2025, 11:42 AM CET