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Title:Money demand stability and inflation prediction in the four largest EMU countries PDF Logo
Authors:Carstensen, Kai
Hagen, Jan
Hossfeld, Oliver
Salazar Neaves, Abelardo
Issue Date:2008
Series/Report no.:Kiel working paper 1443
Abstract:In this paper we analyze the money demand functions of the four largest EMU countries and of the four-country (EMU-4) aggregate. We identify reasonable and stable money demand relationships for Germany, France and Spain as well as the EMU-4 aggregate. For the case of Italy, results are less clear. From the estimated money demand functions, we derive both EMU-4 and country-specific measures of money overhang. We find that the EMU-4 overhang measure strongly correlates with the countryspecific measures, particularly since the start of EMU, and is useful to predict country-specific inflation. However, it generally does not encompass country-specific money overhang measures as predictors of inflation. Hence, aggregate money overhang is an important, but by far not an exhaustive, indicator fort he disaggregate level.
Subjects:Money demand
stability
money overhang
inflation forecast
JEL:E41
E52
Document Type:Working Paper
Appears in Collections:Kieler Arbeitspapiere, IfW
Publikationen von Forscherinnen und Forschern des IfW

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