Money in the Inflation Equation: the Euro Area Evidence
AbstractThe ECB is the only major central bank that still emphasizes the role of money in monetary policy management. In this paper, we bring some support to this approach. Taking into account Euro area data from the period between 1999 and 2007, we demonstrate that a steady 10 per cent increase in M3 may result in an inflation rate of approximately 2½ percentage points. A negative output gap would have a short term offsetting effect, and vice versa.
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Bibliographic InfoPaper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number DR 08012.
Length: 11 pages
Date of creation: May 2008
Date of revision:
ECB; Inflation; Monetary Policy; Money;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-14 (All new papers)
- NEP-CBA-2008-07-14 (Central Banking)
- NEP-EEC-2008-07-14 (European Economics)
- NEP-MAC-2008-07-14 (Macroeconomics)
- NEP-MON-2008-07-14 (Monetary Economics)
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