Currency Substitution and Cross-Border Monetary Aggregation: Evidence From the G-7

October 1, 1992

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Is there a stable aggregate money demand relationship for Europe? If so, why, and if not, why not? These questions are important for the implementation of policy by a European central bank, as well as for the appropriate speed of transition to EMU. This paper addresses them in a multi-country empirical study of money demand for the G-7 countries during the period since 1973. It looks for evidence of currency substitution and tests the restrictions implied by cross-border aggregation within Europe.

Subject: Currencies, Demand for money, Dollarization, Exchange rates, Foreign exchange, Monetary policy, Money, National accounts, Personal income

Keywords: aggregate equation, aggregation restriction, Canada equation, critical value, cross-equation restriction, Currencies, currency substitutability, currency substitution, Demand for money, Dollarization, dynamic error correction equation, equation result, error correction variable, Europe, Exchange rates, money demand equation, non-European equation, Personal income, test statistic, testing equation, WP

Pages:
36
Volume:
1992
DOI:
https://doi.org/10.5089/9781451955040.001
Issue:
081
Series:
Working Paper No. 1992/081
Stock No:
WPIEA0811992
ISBN:
9781451955040
ISSN:
1018-5941

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Notes

A multi-country empirical study of money demand for the G-7 countries during the period since 1973.

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