Abstract
The stability of German money demand has been analyzed in a series of papers in recent years, especially since unification. In this paper the critical question of stability is reviewed, using various estimation techniques and testing procedures for long-run stability. To take financial innovations into account, the opportunity cost measure is calculated by differentiating between traditional savings deposits and special savings facilities, which are a major form of financial innovation in Germany. Overall, there are strong indications of a stable long-run money-demand relationship.
I am indebted to G. Coenen, D. Gerdesmeier, B. Landau and A. Worms of the Deutsche Bundesbank, H.-E. Reimers, J. Wolters, two anonymous referees, as well as the participants in the workshop on “Money demand in Europe” for valuable comments. The data may be obtained from the internet, http://wotan.wiwi.hu-berlin.de/oekonometrie/engl/data.html
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Scharnagl, M. (1999). The stability of German money demand: Not just a myth. In: Lütkepohl, H., Wolters, J. (eds) Money Demand in Europe. Studies in Empirical Economics. Physica, Heidelberg. https://doi.org/10.1007/978-3-662-12539-7_5
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DOI: https://doi.org/10.1007/978-3-662-12539-7_5
Publisher Name: Physica, Heidelberg
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