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Does Money Include Information for Output in the Euro Area?

  • Hans-Eggert Reimers

In this paper, the importance of money for the output development is analysed over the period from 1980 to 2000 for the euro area, where simple sum and Divisia monetary aggregates are used. Adapting an in-sample analysis, all real monetary aggregates help to explain the output gap of the euro area regardless of what real interest rate is used to explain the IS curve. The out-of-sample forecasting exercise presents evidence that broadly defined monetary aggregates reduce the forecast errors of the output gap in the medium term.

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Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

Volume (Year): 139 (2003)
Issue (Month): II (June)
Pages: 231-252

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Handle: RePEc:ses:arsjes:2003-ii-5
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  1. Coenen, Gunter & Levin, Andrew & Wieland, Volker, 2005. "Data uncertainty and the role of money as an information variable for monetary policy," European Economic Review, Elsevier, vol. 49(4), pages 975-1006, May.
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  8. Katrin Wesche, 1997. "The demand for divisia money in a core monetary union," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 51-60.
  9. Pedersen, Torben Mark, 2001. "The Hodrick-Prescott filter, the Slutzky effect, and the distortionary effect of filters," Journal of Economic Dynamics and Control, Elsevier, vol. 25(8), pages 1081-1101, August.
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  16. Frederic S. Mishkin, 1995. "Symposium on the Monetary Transmission Mechanism," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 3-10, Fall.
  17. Luca Dedola & Eugenio Gaiotti & Luca Silipo, 2004. "Money Demand in theEuroArea: Do National Differences Matter?," Macroeconomics 0404019, EconWPA, revised 24 Apr 2004.
  18. Harvey, David & Leybourne, Stephen & Newbold, Paul, 1997. "Testing the equality of prediction mean squared errors," International Journal of Forecasting, Elsevier, vol. 13(2), pages 281-291, June.
  19. 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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