Broad money demand and financial liberalization in Greece

Abstract

This paper develops a constant, data-coherent, error correction model for broad money demand (M3) in Greece. This model contributes to a better understanding of the e®ects of monetary policy in Greece, and of the portfolio consequences of¯nancial innovation in general. The broad monetary aggregate M3 was targeted until recently, and current monetary policy still uses such aggregates as guidelines, yet analysis of this aggregate has been dormant for over a decade.In spite of large°uctuations in the in°ation rate, introduction of new nancial instruments, and liberalization of the¯nancial system, the estimated model is remarkably stable. The dynamics of money demand are important, with price and income elasticities being much smaller in the short run than in the long run.

Demand For Money: Implications for The Conduct of Monetary Policy in Kenya

“…Ericsson and Sharma (1996) argue that although it is easy to control narrowly defined aggregates, they are less useful in policy analysis because their relationship with price and output is subject to considerable variability. Broader monetary aggregates appear more stable relative to nominal income but less amenable to control.…”

Broad Money Demand and Asset Substitution in China

“…Subsequently, Johansen's maximum likelihood procedure is applied to test for cointegration among real money, real output, the RMB deposit rate, the U.S. dollar deposit rate, stock prices, the inflation rate, and the exchange rate. Using this framework, coefficient restrictions and the adjustment mechanisms are examined (see Ericsson et al (1996Ericsson et al ( , 1998Ericsson et al ( , and 2007). Table 1 shows Augmented Dickey-Fuller (ADF) statistics for the main variables in our analysis.…”

“…In a modern economy, money is conventionally held for at least two reasons: (i) as a means of smoothing differences between income and expenditure streams, and (ii) as one among several assets in a portfolio (see Ericsson and Sharma (1996)). The standard theory of money demand posits:…”

“…The negative coefficient implies that lagged excess holdings of money induce smaller holdings of current money, with the small numerical value implying slow adjustment to remaining disequilibriumapproximately 1.1 percent in the first quarter. The size of the estimated coefficient lies at the lower end for developed and developing countries: -0.26, -0.15, and -0.20 where found for the Netherlands, Germany, and France, respectively, and -0.12 and -0.08 for Argentina and Greece (see Taylor (1986) and Ericsson and Sharma (1996)). The lower adjustment coefficient for China may reflect the lack of availability of alternative assets to M2 and a generally repressed financial system.…”

Analiza przyczynowości w długim i krótkim okresie w modelu popytu na pieniądz

“…np. Ericsson, Sharma, 1998;Kontolemis, 2002;Bruzda, 2006 i wiele innych). Z uwagi na nieobserwowalność popytu na pieniądz jest on aproksymowany za pomocą realnej podaży pieniądza, przy założeniu równowa-gi na rynku pieniężnym.…”