Abstract
This paper examines the money demand function of Estonia in the period 1995–2006. Since Estonia has a currency board system, euro area interest rates are taken into account. We apply different cointegration procedures like the Engle–Granger, the dynamic OLS, and the Johansen procedure to estimate the long-run relationship among money, output, and interest rates. The results show that it is difficult to find a cointegrating relationship for the broad money aggregate M2. For the preferred relationship including euro area money market rate and euro area bond rate a dynamic equation is estimated. This dynamic equation is stable for the whole period. The change of the anchor curreny in the currency board and the accession to the European Union do not alter the relationship.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
