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Why has Broad Money Demand been More Stable in the Euro Area than in Other Economies? A Literature Review
Calza, Alessandro | Sousa, João
Credit and Capital Markets – Kredit und Kapital, Vol. 40 (2007), Iss. 1 : pp. 145–163
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Alessandro Calza, Frankfurt/M.
João Sousa, Lisbon
References
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Abstract
Based on a literature survey, this paper reviews the factors that may explain why broad money demand has usually been found to be more stable in the euro area than in other large economies, such as Japan, the US and the UK. The paper concludes that there are three main explanations for this fact. First, some of the sources of instabilities in money demand outside the euro area were country-specific. Second, financial innovation appears to have had a weaker impact on money demand in the euro area than in other economies. A third explanation is that there are gains in terms of stability in aggregating the money demand of the individual euro area countries. (JEL E41, C22, C32)