Estimation of a German Money Demand System - a Long-Run Analysis

Posted: 2 Mar 1999

See all articles by Kirstin Hubrich

Kirstin Hubrich

Board of Governors of the Federal Reserve System

Abstract

This study presents a multivariate analysis of the stability of long-run relationships between variables that influence the conduct and transmission process of the German monetary policy. The initial VAR comprises the variables real money M3, real GNP, the inflation rate, a long-term and a weighted short-term interest rate. A multivariate approach has been chosen, as this allows for more than one cointegration relationship and to test restrictions on the cointegration space. In contrast to most other studies on German monetary policy, three stable and economically plausible cointegration relationships are obtained simultaneously within the framework of the Johansen procedure: a money demand relationship, a long-run Fisher effect and a long-run relationship between the short- and the long-term interest rate. It is apparent that the structural break of German reunification can be modelled incorporating dummy variables in the model.

JEL Classification: E41, E43, C32, C51, C52

Suggested Citation

Hubrich, Kirstin, Estimation of a German Money Demand System - a Long-Run Analysis. Empirical Economics, Vol. 24, No. 1, 1999. Available at SSRN: https://ssrn.com/abstract=151432

Kirstin Hubrich (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
659
PlumX Metrics