Is there a structural break in equilibrium velocity in the euro area?

We investigate the stability of M3 income velocity in the euro area by applying a set of breakpoint procedures. We evidence at least two structural changes that have aected both the level and the slope of M3 velocity around 1992-1993 and 2000-2001. Then, we estimate a model of equilibrium velocity that factors in the opportunity cost of M3. Here again, we …nd some evidence of instability in equilibrium velocity. Given the importance of stable velocity trends for the two-pillar strategy of the ECB, these …ndings may call for some adjustments in the conduct of monetary policy in Euroland