This paper analyses currency in circulation in the euro area since the beginning of the 1980s. After a literature review we present some stylised facts on currency holdings in the euro area countries as well as at an aggregate euro area level. The next chapter develops a theoretical model, which...

A remarkable development seen in recent years is the pronounced decline in euro area M1 velocity vis-a-vis a moderate decline in short-term interest rates, which represent the most natural opportunity cost for M1. This paper endeavous to estimate a demand function for euro area M1, in particular...

The excess liquidity in the euro area is a product of a long period of quantitative easing. It changed the operational framework of the European Central Bank (ECB)’s monetary policy from the scarce reserves system (SRS) to the abundant reserves system (ARS). To eliminate excess liquidity and...

Does the federal funds rate respond to shocks when aggregate reserves are in the trillions of dollars? Has banks' demand for reserves moved over time? We provide a structural time-varying estimate of the slope of the reserve demand curve over 2010-21. We estimate a time-varying vector...

In this paper we present an empirically stable euro area money demand model. Using a sample period until 2009:2 shows that the current financial and economic crisis that started in 2007 does not appear to have any noticeable impact on the stability of the euro area money demand function. We also...

Recent empirical studies have found evidence of unstable long run money demand functions if recent data are used. If the link between money balances and the macroeconomy is fragile, the rationale of monetary aggregates in the ECB strategy has to be doubted. In contrast we present a "stable''...