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Long-run neutrality of money supply for food prices in Germany with policy effects

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  • Meyer, Stefan
  • Yu, Xiaohua

Abstract

Using a modified Fisher-Seater model with consideration of policy impacts, this paper attempts to tests the long-run neutrality of money supply on food prices in Germany after the launching of the Eurozone. The main findings include: (1) we can not reject the super neutrality of money for aggregated food prices; (2) However, staple food and its derived products – meat- are very sensitive to money supply, and their prices can increase to be much higher than money growth rate, perhaps due to speculative effects and demand effects; (3) Fresh or perishable products are usually less sensitive to money growth; (4) Most products decreased their prices after the launching of decoupling policy in Europe in 2003. The results can explain the links between money supply and food prices in a long run and also give insightful implications for the ongoing reform of CAP (Common Agricultural Policy) in Europe.

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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland with number 114640.

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Date of creation: 2011
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Handle: RePEc:ags:eaae11:114640

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Keywords: money supply; German food prices; CAP; Agricultural and Food Policy; Agricultural Finance;

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  1. Meyer, Jochen & von Cramon-Taubadel, Stephan, 2002. "Asymmetric Price Transmission: A Survey," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24822, European Association of Agricultural Economists.
  2. James Bullard, 1999. "Testing long-run monetary neutrality propositions: lessons from the recent research," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 57-77.
  3. Fisher, Mark E & Seater, John J, 1993. "Long-Run Neutrality and Superneutrality in an ARIMA Framework," American Economic Review, American Economic Association, vol. 83(3), pages 402-15, June.
  4. Chambers, Robert G. & Just, Richard E., 1982. "An investigation of the effect of monetary factors on agriculture," Journal of Monetary Economics, Elsevier, vol. 9(2), pages 235-247.
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