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From the general to the specific: The demand for M2 in three European countries

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Abstract

This paper examines the demand for broad money in West Germany, the Netherlands and France. We give an exposition of and apply the “general to specific” econometric modelling methodology which has been successful in modelling the demand for money in the U.K. We find stable short-run demand functions for each of the three countries examined, using a consistent data base previously published by other researchers. Each of the estimated short-run equations has a long-run or steady-state solution which is consistent with economic theory. For West Germany and the Netherlands we find long-run income elasticities of unity, which constrasts with the results of earlier studies.

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Authors and Affiliations

  1. Economics Division, Bank of England, Threadneedle Street, EC2R 8AH, London

    M. P. Taylor

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  1. M. P. Taylor
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This paper has been improved following the constructive comments of an anonymous referee, although responsibility for any remaining errors, omissions or interpretations rests with the author. Any views expressed are those of the author and are not necessarily those of the Bank of England. I am grateful to the UK Economic and Social Research Council for research funding under grant number B00232148.

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Taylor, M.P. From the general to the specific: The demand for M2 in three European countries. Empirical Economics 11, 243–261 (1986). https://doi.org/10.1007/BF01977004

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  • DOI: https://doi.org/10.1007/BF01977004

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