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Analysing Divisia Aggregates for the Euro Area

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  • Reimers, Hans-Eggert

Abstract

In this paper, different Divisia monetary aggregates for the euro area are constructed over the period from 1980 to 2000. Theoretically, one main difference of these aggregates is their reaction to exchange-rate variations. Empirically, the aggregates are compared with respect to three issues. First, the demand for the Divisia aggregates is evaluated using the cointegrated VEC model and single-equation techniques, where stable demand functions are estimated. Second, the information content of these aggregates as regards future output is investigated. Evidence is presented that one of the Divisia aggregates has most information content from a forward-looking perspective. Third, using the P-star framework, the importance of money for future price movements is examined. Adapting an in-sample analysis, Divisia aggregates are important for HICP development and to some extent for GDP deflator movement. The out-ofsample forecasting exercise presents, on the one hand, evidence that simple-sum M3 includes more information for the HICP, whereas one of the Divisia aggregates helps to predict the future GDP deflator. On the other hand conspicuous control errors exist. In sum, the paper supports the view that money should have an important role in the conduct of monetary policy in the euro area. -- In dieser Studie werden verschiedene Divisia-Aggregate für das Eurowährungsgebiet für den Zeitraum von 1980 bis 2000 berechnet. Ein wichtiger theoretischer Unterschied dieser Aggregate ist ihre Reaktion auf Wechselkursänderungen. Empirisch werden die Aggregate mit dem Summenaggregat M3 in Bezug auf drei Fragestellungen verglichen. Erstens werden Geldnachfragefunktionen von Divisia-Aggregaten mit Hilfe von kointegrierten VEC-Modellen und von Einzelgleichungsansätzen geschätzt. Es zeigt sich, dass stabile Gleichungen bestimmt werden. Zweitens wird der Informationsgehalt der Aggregate bez¨uglich der zukünftigen Outputentwicklung untersucht. Hierbei stellt sich heraus, dass eines der Divisia-Aggregate mehr Informationsgehalt als die anderen Aggregate besitzt. Drittens wird die Bedeutung des Geldes für die zukünftige Preisentwicklung analysiert. Bei der ex post-Analyse wird deutlich, dass Divisia-Aggregate die Entwicklung des Harmonisierten-Verbraucher-Preisindexes (HICP) und in geringerem Umfang die Entwicklung des BIP-Deflators beeinflussen. Die ex ante-Analyse verdeutlicht einerseits, dass das einfache Summenaggregate M3 mehr Informationsgehalt für die Entwicklung des HICP als die anderen Aggregate enthält, während eines der Divisia- Aggregate hilft die Vorausschätzung des zukünftigen DIP-Deflators zu verbessern. Andererseits gibt es erhebliche Kontrollfehler. Zusammenfassend unterstützt die Studie die Auffassung, dass die Geldmenge eine wichtige Rolle bei der Durchführung der Geldpolitik im Eurowährungsraum haben sollte.

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2002,13.

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Date of creation: 2002
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Handle: RePEc:zbw:bubdp1:4178

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Keywords: Divisia monetary aggregate; Money demand; Controllability; IS-curves; P-Star;

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References

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Cited by:
  1. Hans-Eggert Reimers, 2003. "Does Money Include Information for Output in the Euro Area?," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), Swiss Society of Economics and Statistics (SSES), vol. 139(II), pages 231-252, June.
  2. Barnett, William A., 2003. "Aggregation-theoretic monetary aggregation over the euro area, when countries are heterogeneous," Working Paper Series, European Central Bank 0260, European Central Bank.
  3. William A. Barnett, 2004. "Multilateral Aggregation-Theoretic Monetary Aggregation over Heterogeneous Countries," Macroeconomics, EconWPA 0412009, EconWPA.
  4. Hans-Eggert Reimers, 2003. "Does Money Include Information for Prices in the Euro Area?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 223(5), pages 581-602, September.

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