The Implications of Cross-Border Monetary Aggregation

ByTimothy D. Lane, Jeroen J. M. Kremers

September 1, 1992

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Some recent studies suggest the possibility of estimating a stable aggregate demand-for-money relationship for the group of countries participating in the European Monetary System. These results are of particular relevance in connection with the task of setting policy targets for a European Central Bank. This paper uses a theoretical error-invariables framework to identify what is gained and what may be lost through cross-border aggregation of money demand. It provides an analytical basis for such studies, paying particular attention to currency substitution and international portfolio diversification.

Subject: Currencies, Demand for money, Dollarization, Monetary policy, Money, National accounts, National income, Personal income

Keywords: aggregate demand, aggregate money demand disturbance, Currencies, Demand for money, disequilibrium money holding, Dollarization, measurement error, money demand, money demand equation, National income, Personal income, portfolio diversification, WP

Pages:
22
Volume:
1992
DOI:
https://doi.org/10.5089/9781451959789.001
Issue:
071
Series:
Working Paper No. 1992/071
Stock No:
WPIEA0711992
ISBN:
9781451959789
ISSN:
1018-5941

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Notes

This paper uses a theoretical error-invariables framework to identify what is gained and what may be lost through corss-border aggregation of money demand.

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