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Does Money Granger Cause Inflation in the Euro Area?

Listed author(s):
  • Carlos Robalo Marques
  • Joaquim Pina

In this paper we re-evaluate the empirical evidence on money-inflation Granger causality for the euro area and, in contrast to Trecroci and Vega (2000), conclude that money does in fact Granger cause inflation. We also show that it takes about a year and a half for changes in money growth to start passing on to inflation and five years for the whole adjustment to take place

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File URL: https://www.bportugal.pt/sites/default/files/anexos/papers/ab200307_e.pdf
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Article provided by Banco de Portugal, Economics and Research Department in its journal Economic Bulletin.

Volume (Year): (2003)
Issue (Month): ()
Pages:

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Handle: RePEc:ptu:bdpart:b200307
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  1. Toda, Hiro Y & Phillips, Peter C B, 1993. "Vector Autoregressions and Causality," Econometrica, Econometric Society, vol. 61(6), pages 1367-1393, November.
  2. Yamada, Hiroshi & Toda, Hiro Y., 1998. "Inference in possibly integrated vector autoregressive models: some finite sample evidence," Journal of Econometrics, Elsevier, vol. 86(1), pages 55-95, June.
  3. G. Coenen & J.-L. Vega, 2001. "The demand for M3 in the euro area," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(6), pages 727-748.
  4. Phillips, Peter C B, 1995. "Fully Modified Least Squares and Vector Autoregression," Econometrica, Econometric Society, vol. 63(5), pages 1023-1078, September.
  5. Gerlach, Stefan & Svensson, Lars E. O., 2003. "Money and inflation in the euro area: A case for monetary indicators?," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1649-1672, November.
  6. Stock, James H. & Watson, Mark W., 1999. "Forecasting inflation," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 293-335, October.
  7. Friedman, Milton, 1972. "Have Monetary Policies Failed?," American Economic Review, American Economic Association, vol. 62(2), pages 11-18, May.
  8. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
  9. Brand, Claus & Cassola, Nuno, 2000. "A money demand system for euro area M3," Working Paper Series 0039, European Central Bank.
  10. Carlos Robalo Marques & Joaquim Pina, 2003. "Does Money Granger Cause Inflation in the Euro Area?," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  11. Nicoletti-Altimari, Sergio, 2001. "Does money lead inflation in the euro area?," Working Paper Series 0063, European Central Bank.
  12. Johansen, Soren, 1992. "Testing weak exogeneity and the order of cointegration in UK money demand data," Journal of Policy Modeling, Elsevier, vol. 14(3), pages 313-334, June.
  13. James H. Stock & Mark W. Watson, 1998. "Diffusion Indexes," NBER Working Papers 6702, National Bureau of Economic Research, Inc.
  14. Trecroci, Carmine & Vega, Juan Luis, 2000. "The information content of M3 for future inflation," Working Paper Series 0033, European Central Bank.
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