Stability of the Euro-Demand Function

Authors

King Banaian, St. Cloud State UniversityFollow
Artatrana Ratha, St. Cloud State UniversityFollow

Document Type

Working Paper

Publication Date

2008

Abstract

While the empirical literature on money demand is vast by any standards, it is relatively silent when it comes to the Euro, a major currency in the world. This hampers efforts, for example, to determine whether or not the European Central Bank can target monetary aggregates for inflation control. The difficulty has come from the lack of information about euro-wide monetary behavior, relying instead on speculative techniques for aggregating country-level data from previous periods of the European exchange rate mechanism. Now that we have six years of monthly data points, we investigate the stability of various Euro-zone monetary aggregates using the Bound Testing Procedure of Cointegration proposed by Pesaran et al. (2001) and study their policy implications.

Recommended Citation

Banaian, King and Ratha, Artatrana, "Stability of the Euro-Demand Function" (2008). Economics Faculty Working Papers. 13.
https://repository.stcloudstate.edu/econ_wps/13