The Demand for Money in Switzerland 1936-1995

This paper studies money demand in Switzerland. While the existing literature typically analyzes post-1973 data, this study uses data covering six decades. We test for cointegration in a system incorporating money, prices, income, a bond yield, and a deposit rate, and find evidence of a single cointegrating vector which feeds into the real money stock. Income and interest-rate elasticities lie within the range of previous findings. Furthermore, we estimate an error-correction model for the real money stock, which additionally includes the Swiss-US interest-rate spread. This model appears stable in- and outof- sample and passes a number of diagnostic tests.