Working Papers present research work by both Danmarks Nationalbank’s employees and our partners. Working Papers are primarily targeted at professionals and people with an interest in central banking research as well as economics and finance in a broader sense.
Working Paper: A new model for money demand in Denmark: Money demand in a negative interest rate environment
Within a cointegrated VAR framework I show that the traditional money-demand relation can no longer explain the recent development of monetary aggregates in Denmark. Instead, I argue that the introduction of housing wealth and the role of precautionary demand for liquidity improves both the explanatory power of money demand and the stability of the long-run estimates. Finally, I show that the negative interest rate environment has not affected the underlying determination of money demand.