The stability of german money demand: Not just a myth |
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Authors: | Michael Scharnagl |
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Institution: | (1) Deutsche Bundesbank, Wilhelm-Epstein-Str.14, D-60431 Frankfurt/Main, Germany |
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Abstract: | The stability of German money demand has been analyzed in a series of papers in recent years, especially since unification. In this paper the critical question of stability is reviewed, using various estimation techniques and testing procedures for long-run stability. To take financial innovations into account, the opportunity cost measure is calculated by differentiating between traditional savings deposits and special savings facilities, which are a major form of financial innovation in Germany. Overall, there are strong indications of a stable long-run money-demand relationship.I am indebted to G. Coenen, D. Gerdesmeier, B. Landau and A. Worms of the Deutsche Bundesbank, H.-E. Reimers, J. Wolters, two anonymous referees, as well as the participants in the workshop on Money demand in Europe for valuable comments. The data may be obtained from the internet, http://wotan.wiwi.hu-berlin.de/oekonometrie/engl/data.html |
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Keywords: | Money demand stability tests financial innovations |
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