Heterogeneous distribution of money supply across the euro area

The recent economic crisis is regarded as symmetric shock which negatively affects all Eurozone member countries. Even if the whole euro area is in recession the probability of asymmetric shock arises on the monetary side of the economy. The issue is that money supply is unevenly distributed across the euro area. Different credit money creation increases inflationary pressures not only in long run but also in short-term, especially in house prices. The combination of credit money creation and increases in asset prices contributes to financial instability. The empirical part of the paper is based on the analysis in time-frequency domain. The authors apply wavelet analysis to identify increasing differences of co-movements in money supply between the selected old Eurozone member states and peripheral countries. The authors use the contribution of different member countries to the monetary aggregate M3 as the proxy of money supply distribution across the euro area.