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Title:Heterogeneity in money holdings across euro area countries: the role of housing PDF Logo
Authors:Setzer, Ralph
van den Noord, Paul
Wolff, Guntram B.
Issue Date:2010
Series/Report no.:Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Trade, Financial Markets, and the Euro E12-V3
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. We infer from these findings that housing developments should feature prominently in the ECB's monetary analysis.
Subjects:Money, housing, national contribution, euro area
JEL:E41
E51
E52
Document Type:Conference Paper
Appears in Collections:Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie

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