Empirical Economics

, Volume 23, Issue 3, pp 483–506

Long run money demand in the EU: Evidence for area-wide aggregates

  • Gabriel Fagan
  • Jérôme Henry


Long-run properties of EU-wide money aggregates are analysed. For each of the three aggregates considered-Currency, M1 and M3H-it is possible to obtain cointegrating relationships with GDP and interest rates (long or short term market interest rates). Results are not improved when traditional aggregates, obtained by aggregating existing national aggregates, are extended by the inclusion of various measures of Cross-Border Holdings. Specific attention is also paid to aggregation issues and the relative performance of area-wide and national equations. The results show that aggregation bias is not a major problem and that the relatively good area-wide performance is largely a consequence of a statistical averaging effect.

Key words

Money demand cross-country comparisons European Union aggregation monetary targeting 

JEL classification

E41 E52 


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Copyright information

© Springer-Verlag 1998

Authors and Affiliations

  • Gabriel Fagan
    • 1
  • Jérôme Henry
    • 1
  1. 1.MESD Stage Three DivisionEuropean Monetary InstituteFrankfurt am MainGermany

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