Estimation of a German money demand system - a long-run analysis

Kirstin Hubrich
1999 Empirical Economics  
This study presents a multivariate analysis of the stability of longrun relationships between variables that in¯uence the conduct and transmission process of the German monetary policy. The initial VAR comprises the variables real money M3, real GNP, the in¯ation rate, a long-term and a weighted short-term interest rate. A multivariate approach has been chosen, as this allows for more than one cointegration relationship and to test restrictions on the cointegration space. In contrast to most
more » ... er studies on German monetary policy, three stable and economically plausible cointegration relationships are obtained simultaneously within the framework of the Johansen procedure: a money demand relationship, a long-run Fisher e¨ect and a long-run relationship between the short-and the long-term interest rate. It is apparent that the structural break of German reuni®cation can be modelled incorporating dummy variables in the model.
doi:10.1007/s001810050045 fatcat:fbyt2rupmre43jzcazohnvvhre