Abstract
This paper revisits the empirical properties of euro area M3 over the years 1980 to 2017. We estimate a CVAR model that includes wealth in addition to conventional drivers. Our empirical analysis identifies three long run cointegration relations - one of which can be interpreted as a stable money demand function. We detect that wealth effects coming from movements of stock prices and housing wealth had a positive effect on the long-run money demand for M3 and on output. Moreover, we confirm leading indicator properties of M3 excess liquidity for inflation, in particular at horizons between 1 and 2 years.
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