Advanced Search
MyIDEAS: Login

Does Money Help Predict Inflation? An Empirical Assessment for Central Europe

Contents:

Author Info

  • Roman Horvath
  • Lubos Komarek
  • Filip Rozsypal

Abstract

This paper investigates the predictive ability of money for future inflation in the Czech Republic, Hungary, Poland, and Slovakia. We construct monetary indicators similar to those the ECB regularly uses for monetary analysis. We find some in-sample evidence that money matters for future inflation at the policy horizons that central banks typically focus on, but our pseudo out-of-sample forecasting exercise shows that money does not in general improve the inflation forecasts vis-Ã -vis some benchmark models, such as the autoregressive process. Since at least some models containing money improve the inflation forecasts in certain periods, we argue that money still serves as a useful cross-check for monetary policy analysis.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cnb.cz/en/research/research_publications/cnb_wp/download/cnbwp_2010_05.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Czech National Bank, Research Department in its series Working Papers with number 2010/05.

as in new window
Length:
Date of creation: Dec 2010
Date of revision:
Handle: RePEc:cnb:wpaper:2010/05

Contact details of provider:
Postal: Na Prikope 28, 115 03 Prague 1
Phone: 00420 2 2442 1111
Fax: 00420 2 2421 8522
Email:
Web page: http://www.cnb.cz/en/research/research_intro/
More information through EDIRC

Related research

Keywords: Central Europe; forecasting; inflation; money.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Assenmacher-Wesche, Katrin & Gerlach, Stefan & Sekine, Toshitaka, 2008. "Monetary factors and inflation in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 22(3), pages 343-363, September.
  2. Fidrmuc, Jarko, 2006. "Money Demand and Disinflation in Selected CEECs during the Accession to the EU," Discussion Papers in Economics 1232, University of Munich, Department of Economics.
  3. Tilak Abeysinghe & Tan Khay Boon, 1999. "Small sample estimation of a cointegrating vector: an empirical evaluation of six estimation techniques," Applied Economics Letters, Taylor and Francis Journals, vol. 6(10), pages 645-648.
  4. Bennett T. McCallum, 2001. "Monetary Policy Analysis in Models Without Money," NBER Working Papers 8174, National Bureau of Economic Research, Inc.
  5. James H. Stock & Mark W. Watson, 1991. "A simple estimator of cointegrating vectors in higher order integrated systems," Working Paper Series, Macroeconomic Issues 91-3, Federal Reserve Bank of Chicago.
  6. Balazs Egert & Lubos Komarek, 2005. "Foreign Exchange Interventions and Interest Rate Policy in the Czech Republic: Hand in Glove?," Working Papers 2005/07, Czech National Bank, Research Department.
  7. Christian Dreger & Hans-Eggert Reimers & Barbara Roffia, 2006. "Long-run money demand in the new EU Member States with exchange rate effects," Working Paper Series 628, European Central Bank.
  8. James H. Stock & Mark W. Watson, 2007. "Why Has U.S. Inflation Become Harder to Forecast?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 3-33, 02.
  9. Gunter Coenen & Juan Luis Vega, 2000. "The Demand for M3 in the Euro Area," Econometric Society World Congress 2000 Contributed Papers 0976, Econometric Society.
  10. James H. Stock & Mark W. Watson, 2007. "Erratum to "Why Has U.S. Inflation Become Harder to Forecast?"," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(7), pages 1849-1849, October.
  11. Lance J. Bachmeier & Norman R. Swanson, 2005. "Predicting Inflation: Does The Quantity Theory Help?," Economic Inquiry, Western Economic Association International, vol. 43(3), pages 570-585, July.
  12. Phillips, Peter C B & Hansen, Bruce E, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 99-125, January.
  13. Peter C.B. Phillips, 1992. "Some Exact Distribution Theory for Maximum Likelihood Estimators of Cointegrating Coefficients in Error Correction Models," Cowles Foundation Discussion Papers 1039, Cowles Foundation for Research in Economics, Yale University.
  14. Pesaran, M.H. & Smith, R., 1992. "Estimating Long-Run Relationships From Dynamic Heterogeneous Panels," Cambridge Working Papers in Economics 9215, Faculty of Economics, University of Cambridge.
  15. Binner, J.M. & Tino, P. & Tepper, J. & Anderson, R. & Jones, B. & Kendall, G., 2010. "Does money matter in inflation forecasting?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(21), pages 4793-4808.
  16. Fourçans, André & Vranceanu, Radu, 2008. "Money in the Inflation Equation: the Euro Area Evidence," ESSEC Working Papers DR 08012, ESSEC Research Center, ESSEC Business School.
  17. Carmine Trecroci & Juan Luis Vega-Croissier, 2000. "The information content of M3 for future inflation," Working Paper Series 33, European Central Bank.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Afees Salisu & Idris Ademuyiwa & Basiru Fatai, 2013. "Modelling the Demand for Money in Sub-Saharan Africa (SSA)," Economics Bulletin, AccessEcon, vol. 33(1), pages 635-647.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cnb:wpaper:2010/05

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jan Babecky).

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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