Currency Substitution And Cross Border Monetary Aggregation
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Currency Substitution and Cross-Border Monetary Aggregation
Author: Mr.Timothy D. Lane
language: en
Publisher: International Monetary Fund
Release Date: 1992-10-01
Is there a stable aggregate money demand relationship for Europe? If so, why, and if not, why not? These questions are important for the implementation of policy by a European central bank, as well as for the appropriate speed of transition to EMU. This paper addresses them in a multi-country empirical study of money demand for the G-7 countries during the period since 1973. It looks for evidence of currency substitution and tests the restrictions implied by cross-border aggregation within Europe.
The Implications of Cross-Border Monetary Aggregation
Author: Mr.Timothy D. Lane
language: en
Publisher: International Monetary Fund
Release Date: 1992-09-01
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.
Cross-Border Deposits and Monetary Aggregates in the Transition to EMU
Author: Mr.Carlo Cottarelli
language: en
Publisher: International Monetary Fund
Release Date: 1991-11-01
This paper discusses the effect of cross-border deposits (CBDs) for the stability of the relation between monetary aggregates and nominal GDP in the five largest EC countries. The analysis is developed in terms of “information content” of alternative money definitions (including or excluding selected subsets of CBDs), derived from a multicountry simultaneous system of money demand equations. We show that in the most recent period traditional money aggregates have lost information value and that they are dominated by alternative money definitions that include CBDs, such as those based on the residency of the holder or on the currency of denomination.