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Admissible monetary aggregates for the euro area

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  • Binner, Jane M.
  • Bissoondeeal, Rakesh K.
  • Elger, C. Thomas
  • Jones, Barry E.
  • Mullineux, Andrew W.

Abstract

We use the Fleissig and Whitney [Fleissig, A.R., Whitney, G.A., 2003. A new PC-based test for Varian's weak separability conditions. Journal of Business and Economics Statistics 21 (1), 133-144] weak separability test to determine admissible levels of monetary aggregation for the Euro area. We find that the Euro area monetary assets in M2 and M3 are weakly separable and construct admissible Divisia monetary aggregates for these assets. We show that real growth of the admissible Divisia aggregates enters the Euro area IS curve positively and significantly for the period from 1980 to 2005. Out of sample, we show that Divisia M2 and M3 appear to contain useful information for forecasting Euro area inflation.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 28 (2009)
Issue (Month): 1 (February)
Pages: 99-114

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Handle: RePEc:eee:jimfin:v:28:y:2009:i:1:p:99-114

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Web page: http://www.elsevier.com/locate/inca/30443

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Keywords: Weak separability tests IS curve Euro area Divisia aggregates Forecasting;

References

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Cited by:
  1. Ryadh M. Alkhareif & William Barnett, 2012. "Divisia Monetary Aggregates for the GCC Countries," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201209, University of Kansas, Department of Economics, revised Aug 2012.
  2. Binner, Jane & Chen, Shu-Heng & Lai, Ke-Hung & Mullineux, Andrew & Swofford, James L., 2011. "Do the ASEAN countries and Taiwan form a common currency area?," Journal of International Money and Finance, Elsevier, vol. 30(7), pages 1429-1435.

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