Money demand and disinflation in selected CEECs during the accession to the EU
Author: Fidrmuc, Jarko
Source: Applied Economics, Volume 41, Number 10, April 2009 , pp. 1259-1267(9)
Abstract:A panel data set for six countries (Czech Republic, Hungary, Poland, Romania, Slovakia and Slovenia) is used to estimate money demand with panel cointegration methods over the recent disinflation period. The basic money demand model is able to convincingly explain the long-run dynamics of M2 in the selected countries. However, money demand is found to have been significantly determined by the euro area interest rates and the exchange rate against the euro, which indicates possible instability of money demand functions in the Central and Eastern European countries. Therefore, direct inflation targeting is an appropriate monetary regime before the eventual adoption of the euro.
Document Type: Research article
Publication date: 2009-04-01