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Do monetary indicators (still) predict euro area inflation?

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  • Hofmann, Boris

Abstract

This paper assesses the performance of monetary indicators in predicting euro area HICP inflation out-of-sample over the period since the start of EMU considering a wide range of forecasting models, including standard bivariate forecasting models, factor models, simple combination forecasts as well as trivariate two-pillar Phillips Curve type forecasting models. The results suggest that monetary indicators are still useful indicators for inflation in the euro area, but that a thorough and broad based monetary analysis is needed to extract the information content of monetary developments for future inflation.

Suggested Citation

  • Hofmann, Boris, 2006. "Do monetary indicators (still) predict euro area inflation?," Discussion Paper Series 1: Economic Studies 2006,18, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdp1:4469
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    File URL: https://www.econstor.eu/bitstream/10419/19646/1/200618dkp.pdf
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    euro area; inflation; leading indicators; money;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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