A Cointegration Model of Money and Wealth

38 Pages Posted: 13 Mar 2019

See all articles by Katrin Assenmacher

Katrin Assenmacher

European Central Bank (ECB)

Andreas Beyer

European Central Bank (ECB)

Date Written: August 7, 2018

Abstract

Extending the data set used in Beyer (2009) to 2017, we estimate I(1) and I(2) money demand models for euro area M3. After including two broken trends and a few dummies to account for shifts in the variables following the global financial crisis and the ECB's non-standard monetary policy measures, we find that the money demand and the real wealth relations identified in Beyer (2009) have remained remarkably stable throughout the extended sample period. Testing for price homogeneity in the I(2) model we find that the nominal-to-real transformation is not rejected for the money relation whereas the wealth relation cannot be expressed in real terms.

Keywords: money demand, wealth, cointegration, vector error correction model, I(2) analysis

JEL Classification: E41, C32, C22

Suggested Citation

Assenmacher, Katrin and Beyer, Andreas, A Cointegration Model of Money and Wealth (August 7, 2018). CFS Working Paper, No. 619, 2018. Available at SSRN: https://ssrn.com/abstract=3339569 or http://dx.doi.org/10.2139/ssrn.3339569

Katrin Assenmacher

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Andreas Beyer (Contact Author)

European Central Bank (ECB) ( email )

Eurotower
Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
+49 69 1344 6468 (Phone)
+44 69 1344 6000 (Fax)

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