David barr has raised some interesting issues concerning our paper on money demand in the European Monetary System (EMS). These issues can be divided into two groups: Barr’ s comments on our results, and his attempt to replicate these results both in and out of sample.
Angeloni, Ignazio, Carlo Cottarelli, and Aviram Levy, “Cross-Border Deposits and Monetary Aggregates in the Transition to EMU,” IMF Working Paper 91/114 (Washington: International Monetary Fund, November 1991).
Artis, Michael J., “Monetary Policy in Stage Two of EMU: What Can We Learn from the 1990s?” (unpublished; Manchester: University of Manchester, 1991).
Barr, David, “The Demand for Money in Europe—Economic and Monetary Integration and the Aggregate Demand for Money in the EMS: Comment on Kremers and Lane,” Staff Papers, Vol. 39 (September 1992), pp. 718–29.
Bayoumi, Tamim A., and Peter B. Kenen, “Using an EC-Wide Monetary Aggregate in Stage Two of EMU,” IMF Working Paper 92/56 (Washington: International Monetary Fund, July 1992).
Danmarks Nationalbank, “The Money Stock and Domestic Money Creation: Amendments to the Tables and Graphs Section,” Danmarks Nationalbank Monetary Review (May 1991), p. 6.
Kremers, Jeroen J. M., and Timothy D. Lane, “Economic and Monetary Integration and the Aggregate Demand for Money in the EMS,” Staff Papers, Vol. 37 (December 1990), pp. 777–805.
Kremers, Jeroen J. M., and Timothy D. Lane, (1992a), “European Monetary Union Raises Questions About Policy Targets and Indicators,” IMF Survey, Vol. 21 (April 27), pp. 136–39.
Kremers, Jeroen J. M., and Timothy D. Lane, (1992b), “The Implications of Cross-Border Monetary Aggregation” (unpublished; Washington: International Monetary Fund, 1992).
Lane, Timothy D., and Stephen S. Poloz, “Currency Substitution and Cross-Border Monetary Aggregation: Evidence from the Group of Seven” (Washington: International Monetary Fund, forthcoming as a Working Paper, 1992).
Monticelli, Carlo, and Marc-Olivier Strauss-Kahn, “European Integration and the Demand for Broad Money” (unpublished; Economic Unit of the Committee of Governors of EC Central Banks, January 1991).
Jeroen J. M. Kremers is with the Finance Ministry of the Netherlands and Erasmus University in Rotterdam (OCFEB).
Timothy D. Lane is with the Research Department of the IMF.
The sample periods in our 1990 paper were 1978:4–1987:4 for the static equation and 1979:1–1987:4 for the dynamic equation. An unfortunate typographical error in our published paper reported the sample period for the dynamic equation incorrectly as ending in 1984:4; this shorter subsample was in fact used for stability tests, but the estimates reported are for the longer sample. Barr’ s results are actually for a period with one fewer observation than ours: his samples start in 1979:1 and 1979:2 for static and dynamic equations, respectively.