Working Paper: CEPR ID: DP719
Authors: Jorgen von Hagen
Abstract: We present an empirical analysis of German money demand, money supply and monetary policy after German monetary union in 1990. Empirical models for velocity and forecast models for the money multiplier are estimated. Stability analysis reveals that structural stability of the demand for broad money after monetary union must be rejected; stability of the demand for narrow money can be accepted. East German portfolio adjustment with regard to the structure of monetary portfolios occurred quite rapidly. The increase in monetary control uncertainty caused by these adjustments did not, however, impede monetary targeting with reasonable precision.
Keywords: money demand; monetary policy; monetary union
JEL Codes: F31; F33; F36
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| German monetary union (F36) | stability of demand for broad money (M3) (E41) |
| German monetary union (F36) | stability of demand for narrow money (M1) (E41) |
| German monetary union (F36) | volatility of velocity shocks (E41) |
| uncertainty in monetary control after union (E58) | uncertainty in monetary control before union (E58) |
| German monetary union (F36) | functioning of monetary policy (E52) |