Heterogeneity in Money Holdings Across Euro Area Countries: The Role of Housing

44 Pages Posted: 8 Jun 2016

See all articles by Ralph Setzer

Ralph Setzer

European Central Bank (ECB)

Paul van den Noord

Organization for Economic Co-Operation and Development (OECD)

Guntram B. Wolff

Deutsche Bundesbank; University of Bonn - Center for European Integration Studies (ZEI)

Date Written: 2010

Abstract

In this paper we examine why monetary aggregates of euro area Member States have developed differently since the inception of the euro. We derive a money demand equation that incorporates housing wealth and collateral as well as substitution effects on real money holdings. Empirically, we show that cross-country differences in real balances are determined not only by income differences, a standard determinant of money demand, but also by house price developments. Higher house prices and higher user costs of housing are both associated with larger money holdings. Country-specific money holdings are also connected with structural features of the housing market.

Keywords: Money, housing, national contribution, euro area

JEL Classification: E41, E51, E52

Suggested Citation

Setzer, Ralph and van den Noord, Paul and Wolff, Guntram B., Heterogeneity in Money Holdings Across Euro Area Countries: The Role of Housing (2010). Bundesbank Series 1 Discussion Paper No. 2010,04, Available at SSRN: https://ssrn.com/abstract=2785369

Ralph Setzer (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Paul Van den Noord

Organization for Economic Co-Operation and Development (OECD) ( email )

Economics Department (ECO)
2 rue Andre Pascal
75775 Paris Cedex 16
France

Guntram B. Wolff

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

University of Bonn - Center for European Integration Studies (ZEI) ( email )

Regina-Pacis-Weg 3
Postfach 2220
D-53012 Bonn
Germany

HOME PAGE: http://www.uni-bonn.de/~guntram

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