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Alexander C. Jung
''Does liquidity matter for money demand in euro area countries?''
( 2015, Vol. 35 No.2 )
This paper estimates demand functions for the four main components of M3 for the euro area. Its aim is to examine whether the ECB's massive liquidity provision to euro area banks during the financial crisis is an important driver of money demand explaining regional differences across euro area countries. The approach of the paper is to apply panel analysis to the national contributions of the components of M3. Overall, the paper finds that central bank liquidity had a small, positive effect on the (long-run) demand for the components of M3 in the twelve euro area countries included. The liquidity effect is subject to considerable cross-country dispersion.
Keywords: Panel regressions, money demand, components of M3, euro area, liquidity.
JEL: E4 - Money and Interest Rates: General
C3 - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions
Manuscript Received : May 13 2014 Manuscript Accepted : Jun 09 2015

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