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Euro Area Money Demand and International Portfolio Allocation: A Contribution to Assessing Risks to Price Stability

Listed author(s):
  • De Santis, Roberto A
  • Favero, Carlo A.
  • Roffia, Barbara

This paper argues that a stable broad money demand for the euro area over the period 1980-2011 can be obtained by modelling cross border international portfolio allocation. As a consequence, model-based excess liquidity measures, namely the difference between actual M3 growth (net of the inflation objective) and the expected money demand trend dynamics, can be useful to predict HICP inflation.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8957.

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Date of creation: May 2012
Handle: RePEc:cpr:ceprdp:8957
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