In this paper we present an empirically stable euro area money demand model. Using a sample period until 2009:2 shows that the current financial and economic crisis that started in 2007 does not appear to have any noticeable impact on the stability of the euro area money demand function. We also...

The conditions under which European monetary policy is likely to be conducted are investigated by means of multi-variate time series modelling using aggregated data of all eleven European Monetary Union member states. A cointegration analysis identifies two stable long-run relationships, one of...

This paper explores the stability of the relation between money demand for M3 and inflation in the euro area by including the recent period of the financial crisis. Evidence is based on a cointegration analysis, where inflation and asset prices are allowed to enter the long run relationship. By...

The analysis of monetary developments have always been a cornerstone of the ECB’s monetaryanalysis and, thus, of its overall monetary policy strategy. In this respect, money demandmodels provide a framework for explaining monetary developments and assessing price stabilityover the medium term....

In order to identify structural shocks that affect economic variables, restrictions need to be imposed on the parameters of structural vector autoregressive (SVAR) models. Economic theory is the primary source of such restrictions. However, only over-identifying restrictions can be tested with...

We consider structural vector autoregressions identified through stochastic volatility. Our focus is on whether a particular structural shock is identified by heteroskedasticity without the need to impose any sign or exclusion restrictions. Three contributions emerge from our exercise: (i) a set...

This paper investigates the usefulness of the money demand relationship in times of unconventional monetary policies by cointegration methods. In contrast to the bulk of the literature, evidence in favour of a stable long run money demand function is presented both for the US and the euro area....

This paper examines the forecasting performance of a broad monetary aggregate (M3) in predicting euro area inflation. Excess liquidity is measured as the difference between the actual money stock and its fundamental value, the latter determined by a money demand function. The out-of sample...

This study develops a parsimonious stable coefficient money demand model for Estonia for the period from 1995 till 2006. Using the Johansen Full Information Maximum Likelihood framework the two cointegrating vectors are found among the system variables including the real money balances, the...