Abstract

http://ssrn.com/abstract=1593025
 
 

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Is Euro Area Money Demand (Still) Stable? Cointegrated VAR Versus Single Equation Techniques


Ansgar Hubertus Belke


University of Duisburg-Essen - Department of Economics; Institute for the Study of Labor (IZA)

Robert Czudaj


University of Duisburg-Essen

March 1, 2010

Ruhr Economic Paper No. 171
DIW Berlin Discussion Paper No. 982

Abstract:     
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 compare single equation methods like the ARDL approach, FM-OLS, CCR and DOLS with the commonly used cointegrated Johansen VAR framework and show that the former are under certain circumstances more appropriate than the latter. What is more, they deliver results that are more in line with the economic theory. Hence, FMOLS, CCR and DOLS are useful in estimating standard money demand as well, although they have only been rarely applied for this purpose in previous studies.

Number of Pages in PDF File: 45

Keywords: ARDL Model, Cointegration, Euro Area, Financial Crisis, Money Demand

JEL Classification: C12, C22, C32, E41, E43, E58

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Date posted: April 20, 2010 ; Last revised: July 13, 2010

Suggested Citation

Belke, Ansgar Hubertus and Czudaj, Robert, Is Euro Area Money Demand (Still) Stable? Cointegrated VAR Versus Single Equation Techniques (March 1, 2010). Ruhr Economic Paper No. 171; DIW Berlin Discussion Paper No. 982. Available at SSRN: http://ssrn.com/abstract=1593025 or http://dx.doi.org/10.2139/ssrn.1593025

Contact Information

Ansgar Hubertus Belke (Contact Author)
University of Duisburg-Essen - Department of Economics ( email )
Universitätsstraße 12
Essen, DE Northrhine-Westphalia 45117
Germany
+49 201 183 2277 (Phone)
+49 201 183 4181 (Fax)
HOME PAGE: http://www.uni-due.de/makrooekonomik/
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Robert Czudaj
University of Duisburg-Essen ( email )
Lotharstrasse 1
Duisburg, 47048
Germany
(0049) 201 183-3516 (Phone)
(0049) 201 183-3995 (Fax)
HOME PAGE: http://www.oek.wiwi.uni-due.de/en/team/robert-czudaj/
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