Why Has Broad Money Demand Been More Stable in the Euro Area than in Other Economies? A Literature Review
29 Pages Posted: 26 Jan 2004
Date Written: September 2003
Based on a literature review, this paper investigates the reasons why broad money demand has usually been found to be more stable in the euro area than in other large economies. The paper concludes that there are three main explanations for this fact. First, in some countries outside the euro area the sources of instabilities in money demand were country-specific. Second, financial innovation appears to have had a weaker impact on money demand in the euro area than in other economies. A third explanation is that there are gains in terms of stability in aggregating the money demand of the individual euro area countries.
Keywords: Money demand, financial innovation, aggregation, euro area
JEL Classification: E41, C22, C32
Suggested Citation: Suggested Citation