Scandinavian Working Papers in Economics
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Institute for Economies in Transition, Bank of Finland BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland

No 13/2010:
Wealth effects and Russian money demand

Aaron Mehrotra () and Alexey A. Ponomarenko

Abstract: We examine wealth effects for Russian money demand in a cointegrated vector autoregressive framework. We find that an aggregate wealth variable, as well as the components housing and equity prices included separately, significantly enter the long-run money demand relationship. There are feedback effects from money to wealth. However, the remonetization process lead to high income elasticities even when wealth is included in the model. System instability coincides with the arrival of the global financial crisis in late 2008.

Keywords: money demand; wealth effects; financial crisis; Russia; (follow links to similar papers)

JEL-Codes: E21; E41; (follow links to similar papers)

31 pages, August 23, 2010

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