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...

Money growth in the euro area has exceeded its target since 2001. Likewise, recent empirical studies did not find evidence in favour of a stable long run money demand function. The equation appears to be increasingly unstable if more recent data are used. If the link between money balances and...