The Demand for Money in Greece 1962 to 1998

The paper examines the demand for narrow money in Greece over the period 1962 to 1998. The data is tested to examine the order of integration. Estimation of the demand function follows the two step methodology. The first step entails the specification of the long run equilibrium relationship between real narrow money, the index for industrial production (a proxy for real income), an interest rate and the rate of inflation through the estimation of the cointegrating vector by the Johansen technique. The second step involves an Error Correction Equation being estimated to provide the short-run dynamics. Finally the model is simulated to see how well it tracks the actual values of the dependent variable