Does Money Matter For Inflation In The Euro Area?
Abstract"We analyze the relationship between M3 growth and inflation within an error correction framework including also the output gap, the 3-mo EURIBOR, and the 10-yr government bond yield. We find robust cointegration between money growth and inflation. Shocks in M3 growth account for up to 30% of the inflation forecast error variance, while the effects of output gap and interest rate shocks are mainly transitory. Significantly different dynamics are found during periods at the end of the seventies and beginning of the eighties when interest rate and inflation rate levels were high and real money growth decreasing. "("JEL "C32, E31, E41) Copyright (c) 2008 Western Economic Association International.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Contemporary Economic Policy.
Volume (Year): 26 (2008)
Issue (Month): 4 (October)
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Other versions of this item:
- Sylvia Kaufmann & Peter Kugler, 2005. "Does Money Matter for Inflation in the Euro Area?," Working papers 2005/09, Faculty of Business and Economics - University of Basel.
- Kaufmann, Sylvia & Kugler, Peter, 2005. "Does Money Matter for Inflation in the Euro Area?," Working Papers 103, Oesterreichische Nationalbank (Austrian Central Bank).
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
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