Abstract
This paper analyzes the question whether money demand in the Euro area has undergone a structural change in recent time when M3 money growth has considerably overshot the reference value set by the European Central Bank (ECB). It is found that conventional specifications of money demand have in fact become unstable while specifications which are augmented with equity returns and volatility remain stable. Using such an augmented specification, it turns out that the excessive M3 growth rates can largely be attributed to the stock market downswing and do not put a measurable threat to price stability.
Item Type: | Paper |
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Faculties: | Economics Economics > Chairs > CESifo-Professorship for Business Cycle Analysis and Surveys (closed) |
Subjects: | 300 Social sciences > 330 Economics |
JEL Classification: | E41 |
Language: | English |
Item ID: | 19942 |
Date Deposited: | 15. Apr 2014, 08:55 |
Last Modified: | 29. Apr 2016, 09:17 |