The Demand for Money in a Small Open Economy: The Case of Switzerland

Document Type

Article

Language

eng

Format of Original

14 p.

Publication Date

4-1995

Publisher

Springer

Source Publication

Open Economies Review

Source ISSN

0923-7992

Abstract

The paper uses cointegration analysis to investigate the demand for money in Switzerland in the context of an open economy. It considers the general process of financial asset substitution and tests for the relevance of an exchange rate and a foreign interest rate variable in a conventional money demand equation. The results show that the variables entering into the demand for either monetary base or narrow money equation may not form a cointegrated system unless the exchange rate or foreign interest rate variable is included. This provides support to both the currency substitution and capital mobility hypotheses.

Comments

Open Economics Review, Vol. 6, No. 2, (April 1995): 131-144. DOI.

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