Does Money Include Information for Prices in the Euro Area?
AbstractIn this paper, the P-star framework is mainly used to examine the importance of money for future price movements in the euro area. Constructing the equilibrium price level, simple-sum M3 and different Divisia M3 aggregates are considered. In addition, nominal money changes are investigated in inflation equations. Adapting an in-sample analysis, Divisia aggregates are important for HICP development and to some extent for GDP deflator movement. The out-of-sample forecasting exercise presents evidence that simple-sum M3 includes more information for the HICP, whereas one of the Divisia aggregates helps to predict the future GDP deflator.
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Bibliographic InfoArticle provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.
Volume (Year): 223 (2003)
Issue (Month): 5 (September)
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More information through EDIRC
P-star model; Divisia monetary aggregates;
Find related papers by JEL classification:
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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