The Demand for Money in Greece: An Exercise in Econometric Modelling with Cointegrated Variables.

This paper investigates empirically the relationship between the demand for real money balances and its determinants in Greece. The relationship under scrutiny is analyzed in the context of a small system involving money, prices, income, and interest rates using a recently proposed modeling strategy based on sequential reduction of a congruent vector autoregression. Special emphasis is placed on the importance of obtaining adequate representations of the nonstationary features of the data, as well as on the necessity of evaluating a model's adequacy through tests for congruence and encompassing. Copyright 1993 by Blackwell Publishing Ltd