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Does Money Include Information for Prices in the Euro Area?

  • Hans-Eggert Reimers

    ()

    (Hochschule Wismar)

In this paper, the P-star framework is mainly used to examine the importance of money for future price movements in the euro area. Constructing the equilibrium price level, simple-sum M3 and different Divisia M3 aggregates are considered. In addition, nominal money changes are investigated in inflation equations. Adapting an in-sample analysis, Divisia aggregates are important for HICP development and to some extent for GDP deflator movement. The out-of-sample forecasting exercise presents evidence that simple-sum M3 includes more information for the HICP, whereas one of the Divisia aggregates helps to predict the future GDP deflator.

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Article provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.

Volume (Year): 223 (2003)
Issue (Month): 5 (September)
Pages: 581-602

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Handle: RePEc:jns:jbstat:v:223:y:2003:i:5:p:581-602
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  1. Barnett, William A & Offenbacher, Edward K & Spindt, Paul A, 1984. "The New Divisia Monetary Aggregates," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1049-85, December.
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  19. W A Razzak, 2002. "Monetary policy and forecasting inflation with and without the output gap," Reserve Bank of New Zealand Discussion Paper Series DP2002/03, Reserve Bank of New Zealand.
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