, Volume 38, Issue 4, pp 539–553 | Cite as

The (in)stability of money demand in the euro area: lessons from a cross-country analysis

  • Dieter NautzEmail author
  • Ulrike Rondorf
Original Paper


The instability of standard money demand functions has undermined the role of monetary aggregates for monetary policy analysis in the euro area. This paper uses country-specific monetary aggregates to shed more light on the economics behind the instability of euro area money demand. Our results obtained from panel estimation indicate that the observed instability of standard money demand functions could be explained by omitted variables like e.g. technological progress that are important for money demand but constant across member countries.


Money demand Cross-country analysis Panel error correction model Euro area 

JEL Classification

E41 E51 E52 



We thank Jörg Breitung, Christian Offermanns and two anonymous referees for helpful comments and suggestions. This research was supported by the Deutsche Forschungsgemeinschaft through the CRC 649 “Economic Risk”.


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Copyright information

© Springer Science+Business Media, LLC. 2010

Authors and Affiliations

  1. 1.Department of EconomicsFree University BerlinBerlinGermany

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