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| LEADER |
01759nam a2200217Ia 4500 |
| 001 |
10.1016-j.jmacro.2019.01.002 |
| 008 |
220511s2019 CNT 000 0 und d |
| 020 |
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|a 01640704 (ISSN)
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| 245 |
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|a The micro-foundations of an open economy money demand: An application to central and eastern European countries
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| 260 |
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|b Elsevier Ltd
|c 2019
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| 856 |
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|z View Fulltext in Publisher
|u https://doi.org/10.1016/j.jmacro.2019.01.002
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| 520 |
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|a This paper investigates the effect of currency substitution between the currencies of Central and Eastern European (CEE) countries and the euro on CEE money demand functions. In addition, we develop a model with microeconomic foundations, which identifies the difference between currency substitution and money demand sensitivity to exchange rate variations. More precisely, we posit that currency substitution relates to the money demand sensitivity to interest rate spreads between CEE countries and the euro area. Moreover, we show how the exchange rate affects money demand absent a currency substitution effect. This model applies to any country in which an international currency offers liquidity services to domestic agents. The model generates empirical tests of long-run money demand using two complementary cointegrating equations. The opportunity cost of holding the money and the scale variable, either household consumption or output, explain the long-run money demand in CEE countries. © 2019 Elsevier Inc.
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|a CEE countries
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|a Cointegration
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| 650 |
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|a Currency substitution
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|a Money demand
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| 650 |
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|a Open-economy model
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| 700 |
1 |
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|a ALBULESCU, C.T.
|e author
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| 700 |
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|a MILLER, S.M.
|e author
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| 700 |
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|a PÉPIN, D.
|e author
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| 773 |
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|t Journal of Macroeconomics
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