Martin M. G. Fase

Wealth and the demand for money in the European Union

This study presents the results of an empirical analysis of the demand for money in the European Union as a whole over the period 1971–1995, with a particular focus on the impact of financial wealth. The empirical evidence shows a substantial impact of wealth on the demand for M2 and M3, whereas no influence of wealth on the demand for M1 is found. This finding may explain the remarkable increase of the broad monetary aggregates over the last decade or so. This means that taking into account the growth of wealth, the monetary expansion has been fairly modest. The evidence thus indicates that the strong increase of M2 and M3 should be attributed to portfolio investment considerations rather than to an expansionary monetary policy.

The demand for money in EEC countries

Abstract This paper examines the demand for money in the EEC countries and is focussed on five issues. First it starts form a common economic framework, which allows for shifts from M 2 to non-money assets and vice versa . Second, special attention is given to the dynamic structure of the statistical model in order to obtain meaningful conclusions on, e.g., the speed of adjustment of actual to optimal money holdings. Third, the study is entirely based on a uniform set of quarterly data for the eight countries concerned. Fourth, the paper presents a careful examination of the residuals and, finally, analyses the predictive behaviour of the estimated models. For all countries we found long-run income elasticities greater than unity and interest rate elasticities clustered around -0.20. The impact of inflation and the business cycle variable appeared to be significant in the majority of countries considered.

The demand for money in the Netherlands and the other EC countries

SummaryThis paper presents an analysis of the demand for money in each of the single EC countries, using a uniform data set and a common economic framework. The analysis differs from other studies in two major respects. Firstly, a countrywise set-up is chosen instead of an analysis of EC aggregates and secondly, three monetary aggregates —M1, M2, andM3 — are analysed. This approach does justice to possible differences in money demand behaviour in the various countries and avoids the aggregation problem. The estimated money demand equations belong to the class of error-correction models and offer a tool for interpreting differences in monetary developments in the single EC countries. The estimation results show that in most member states the price elasticities are slightly below 1. Other remarkable results are that the demand for money in the southern EC countries is less sensitive to changes in the interest rates and the inflation rate than in the northern countries and that the demand for broadly defined money is more stable than the demand for narrow money. Stability also seems to depend on the size of the country. By weighting the estimates for the individual countries, elasticities of the demand for money of the EC as a whole are obtained, which have a plausible order of magnitude.

The demand for money in the Netherlands revisited

SummaryThis article presents an analysis of demand for money in The Netherlands, both at the aggregate level and the sectoral level. Special attention is devoted to the distinction between short and long run demand. Deviations of the long-run relationships are modelled by means of the error correction mechanism. The elasticities for aggregate demand are consistent with the findings for the money demand by the household and business sectors and correspond reasonably well with those derived from other studies. The estimated equations describe the rise in theM1- andM2-ratio in the 1980s in a satisfactory way, although forM2 from 1987 onwards there is a discrepancy between actual and fitted values. The disaggregated analysis shows that the behaviour of the business sector seems to be responsible for this.

On the Estimation of Lifetime Income

Abstract Lifetime income, say Vs, may be defined as Vs = ΣT t=sctyt where yt is income (earnings) at age t, ct is some discount rate and s is the age an individual enters the labor force. Obviously, yt i.e., the income path over the individuals span of active life, plays a crucial part in the calculation of Vs. Mostly graphical methods have been employed for estimating the income age profile. This article presents a statistical framework for estimating lifetime income. Moreover, the first and second moments of the distribution of lifetime income are derived, and these results are applied to Dutch income data.

Seasonal adjustment as a practical problem

Seasonal adjustment as a practical problem. Prolegomena to actual seasonal adjustment. Mechanical seasonal adjustment methods. ARIMA models and seasonal adjustment. Structural time series models and seasonal adjustment. The adding up problem and seasonally adjusted monetary analysis. Causal methods of seasonal adjustment. Concluding observations. Annex. References. Indexes.

A principal components analysis of market interest rates in The Netherlands, 1962-1970

Abstract This paper reports about a principal components analysis of 20 Dutch market interest rates. We found that on the money market 96% of total variation is explained by the first principal component and 2% by the second one. On the capital market these percentages are 90 and 8. The main conclusions are: (1) the first component identifies the true interest rate, while the second and third component are related to risk and the rate of inflation. (2) The textbook distinction between money and capital markets does not show up. (3) The use of many interest rates in macro models has only a limited economic meaning.

The demand for financial assets : Time series evidence for The Netherlands: 1963:II 1975:IV

Abstract This paper provides a systems approach to a set of four demand-for-liquid-assets equations in The Netherlands, using quarterly data over the period 1963 1975. The main findings are firstly: the estimated cross-elasticity of time and savings deposits reveals complementarity, and secondly: cyclical shifts in the demand equations are particularly evident in time and savings deposits. This indicates that the velocity of circulation for these assets varies with the level of economic activity, while it does not vary for the two other assets considered ‘money’ and ‘other near moneys’.

Baumol's Law and Verdoorn's Regularity

This paper tests the laws of Verdoorn and Baumol for the Netherlands in order to assess whether these laws provide an appropriate framework to interpret developments of output, employment, and wages and prices in the manufacturing industry and the services sector. The empirical evidence is not conclusive with respect to Verdoorns law, but strongly supportive of Baumols law.

Productivity and growth: Verdoorn's law revisited

Abstract This paper presents causality tests on manufacturing output and labour productivity to examine the so-called Verdoorn law. The conclusion is that a modified Granger test supports Verdoorns law.