IDEAS home Printed from https://ideas.repec.org/a/ids/ijmefi/v5y2012i3p244-267.html
   My bibliography  Save this article

Modelling euro area money demand and forecasting inflation in a time-varying environment

Author

Listed:
  • Robert Czudaj

Abstract

In this paper, we present euro area money demand functions estimated for the sample period ranging from January 1994 to November 2010 with total and partial time-varying coefficients accounting for two structural changes. For this purpose, we make use of two different procedures viz. the Lee and Strazicich (2003) unit root test as well as the Bai and Perron (1998, 2003a, 2003b) methodology, which both enable us to determine unknown structural breaks endogenously from the data and we find evidence of two structural breaks in our series owing to the burst of the new economy bubble in 2001 and the global financial and economic crisis around 2007. Moreover, we illustrate that these breaks have affected the parameters of the money demand as well. Furthermore, we check if our demand for broad money with time-varying coefficients helps to improve p-star model based inflation forecasts and show that our forecasts outmatch those resulting from a fixed coefficient approach.

Suggested Citation

  • Robert Czudaj, 2012. "Modelling euro area money demand and forecasting inflation in a time-varying environment," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 5(3), pages 244-267.
    • Handle: RePEc:ids:ijmefi:v:5:y:2012:i:3:p:244-267
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=49047
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijmefi:v:5:y:2012:i:3:p:244-267. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=218 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.