Arbeitspapier
Long-run money demand in the new EU Member States with exchange rate effects
Generally speaking, money demand models represent a natural benchmark against which monetary developments can be assessed. In particular, the existence of a well-specified and stable relationship between money and prices can be perceived as a prerequisite for the use of monetary aggregates in the conduct of monetary policy. In this study a money demand analysis in the new Member States of the European Union (EU) is conducted using panel cointegration methods. A well-behaved long run money demand relationship can be identified only if the exchange rate as part of the opportunity cost is included. In the long-run cointegrating vector the income elasticity exceeds unity. Moreover, over the whole sample period the exchange rates vis-à-vis the US dollar turn out to be significant and a more appropriate variable in the money demand than the euro exchange rate. The present analysis is of importance for the new EU Member States as they are expected to join in the future years the euro area, where money is deemed to be highly relevant - within the two-pillar monetary strategy of the European Central Bank (ECB) - in order to detect risks to price stability over the medium term.
- Language
-
Englisch
- Bibliographic citation
-
Series: ECB Working Paper ; No. 628
- Classification
-
Wirtschaft
Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
Demand for Money
Monetary Policy
- Subject
-
exchange rate
Money demand
new EU member states
Panel Cointegration
Geldnachfrage
Wechselkurs
Kointegration
EU-Mitgliedschaft
- Event
-
Geistige Schöpfung
- (who)
-
Dreger, Christian
Reimers, Hans-Eggert
Roffia, Barbara
- Event
-
Veröffentlichung
- (who)
-
European Central Bank (ECB)
- (where)
-
Frankfurt a. M.
- (when)
-
2006
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Dreger, Christian
- Reimers, Hans-Eggert
- Roffia, Barbara
- European Central Bank (ECB)
Time of origin
- 2006
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