The Demand for Money in the European Union: Further Empirical Results

Abstract

This study estimates a European Union wide demand for money function, for both narrow and broad definitions of money, which differs from others in terms of the specification of the long-run function, the definition of the explanatory variables, the sample period, the coverage of the aggregated data and the estimation methodology. The empirical findings presented suggest the existence of EU demand for money functions for both M1 and M2. This implies that increasing coordination of national monetary policies through the European Monetary Institute is likely to yield benefits for member countries.