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This study develops a parsimonious stable coe?cient money demand model for Estonia for the period from 1995 till 2006. Using the Johansen Full Information Maximum Likelihood framework the two cointegrating vectors are found among the system variables including the real money balances, the gross domestic product, the long- and short-term interest rates, and the rate of inflation. The first cointegrating vector is identified as the money demand function whereas the second as the interest rate parity. Our study contributes to better understanding of the factors shaping the demand for money in the new Member States of the European Union that committed themselves to adopting of the Euro currency in the near future.

The volume gives an overview of money demand analysis in Europe in the eve of the introduction of the Euro in some European countries. It contributes to the discussion on a suitable monetary policy for the new European Central Bank. The alternative strategies under discussion are a direct inflation targeting, an intermediate monetary targeting or a mixture of both. For these policy strategies a stable money demand relation is of central importance. The articles in this volume present empirical studies of money demand based on up-to-date time series econometric methods

European-wide monetary aggregates constructed from pre-unification data cannot be used as evidence that money demand in the Euro area is stable. To overcome the Lucas critique, we apply the standard foreign exchange rate model. Since the uncoordinated country-specific money supply system is abolished, the increased comovement between local monetary aggregates leaves little room for a free ride on the law of large numbers. Current monetary policy decisions must be based on untested relations, & given "the long & variable lags." We conclude that the road toward monetary stability is a nonactivist steady money supply policy. 4 Tables, 1 Figure, 36 References. Adapted from the source document.

Master's thesis in Finance ; We study which variables can explain the demand for cash across countries. Our study is based on 11 years of data for 45 countries ranging from low income to high income. As expected, we find that GDP per capita is positively related to cash per capita, and interest rates are negatively related to cash per capita. Next, we explore whether various measures of country risk (or alternatively, various measures of country's institutional quality) are related to demand for cash. Our results indicate that the country risk variables do not impact the demand for money. However, we find some evidence that Democratic accountability has negative impact on cash holdings, while Government stability has positive impact.

I construct a model in which money and bond holdings are consistent with individual decisions and aggregate variables such as production and interest rates. The agents are infinitely-lived, have constant-elasticity preferences, and receive a fraction of their income in money. Each agent solves a Baumol-Tobin money management problem. Markets are segmented because financial frictions make agents trade bonds for money at different times. Trading frequency, consumption, government decisions and prices are mutually consistent. An increase in inflation, for example, implies higher trading frequency, more bonds sold to account for seigniorage, and lower real balances. ; INOVA, FCT