Economic and Monetary Integration and the Aggregate Demand for Money in the EMS

46 Pages Posted: 15 Feb 2006

See all articles by Jeroen Kremers

Jeroen Kremers

affiliation not provided to SSRN

Timothy Lane

International Monetary Fund (IMF) - Policy Development and Review Department

Date Written: March 1990

Abstract

This study shows that the aggregate demand for M1 in the group of countries participating in the Exchange Rate Mechanism (ERM) of the European Monetary System can be expressed as a stable function of ERM-wide income, inflation, interest rates, and the exchange rate of the European Currency Unit (ECU) vis-à-vis the U.S. dollar. A notable feature of the model is the rapid elimination of monetary disequilibria, in contrast with most single-country estimates which tend to find implausibly slow adjustment. These results are suggestive: if robust, they would indicate that, even at the present stage of economic and monetary integration, a European central bank could, in principle, implement monetary control more effectively than the individual national central banks.

JEL Classification: 311, 423

Suggested Citation

Kremers, Jeroen and Lane, Timothy, Economic and Monetary Integration and the Aggregate Demand for Money in the EMS (March 1990). Available at SSRN: https://ssrn.com/abstract=884656 or http://dx.doi.org/10.2139/ssrn.884656

Jeroen Kremers (Contact Author)

affiliation not provided to SSRN

No Address Available

Timothy Lane

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Washington, DC 20431
United States
202-623-7648 (Phone)
202-623-4405 (Fax)

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