Money demand; cross-country analysis; panel error correction model; euro area
337 International economics
The instability of standard money demand functions has undermined
the role of monetary aggregates for monetary policy analysis in the euro
area. This paper uses country-specific monetary aggregates to shed more
light on the economics behind the instability of euro area money demand.
Our results obtained from panel estimation indicate that the observed
instability of standard money demand functions could be explained by
omitted variables like e.g. technological progress that are important for
money demand but constant across member countries.
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