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Controlling Inflation in Euroland

  • Karen Cabos

    ()

  • Nikolaus A. Siegfried

    ()

For the sake of credibility the ECB has to commit to a clear policy strategy - a direct inflation target or an intermediate monetary target. We offer some information on the scale of control and indicator problems associated with both strategies. We estimate the links between monetary policy actions and inflation in dynamic linear models with the Kalman filter. Using European M3 that the ECB has published recently, we find that the overall control problems involved in targeting money are larger than for direct inflation targets.

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File URL: http://www.rrz.uni-hamburg.de/wst/qmwps/qm101.pdf
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Paper provided by Hamburg University, Department of Economics in its series Quantitative Macroeconomics Working Papers with number 20102.

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Length: 16 pages
Date of creation: Feb 2001
Date of revision:
Handle: RePEc:ham:qmwops:20102
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  1. Carlo Monticelli & Marc-Olivier Strauss-Kahn, 1992. "European integration and the demand for broad money," BIS Working Papers 18, Bank for International Settlements.
  2. Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
  3. Frederic S. Mishkin & Adam S. Posen, 1998. "Inflation Targeting: Lessons from Four Countries," NBER Working Papers 6126, National Bureau of Economic Research, Inc.
  4. Richard H. Clarida & Mark Gertler, 1997. "How the Bundesbank Conducts Monetary Policy," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 363-412 National Bureau of Economic Research, Inc.
  5. Loungani, Prakash & Rush, Mark, 1995. "The Effect of Changes in Reserve Requirements on Investment and GNP," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 511-26, May.
  6. Goldfeld, Stephen M. & Sichel, Daniel E., 1990. "The demand for money," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 1, chapter 8, pages 299-356 Elsevier.
  7. Romer, Christina D. & Romer, David H., 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," Department of Economics, Working Paper Series qt5h07k8vf, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  8. Browne, F.X. & Fagan, G. & Henry, J., 1997. "Money Demand in EU Countries : A Survey," Papers 7, European Monetary Institute.
  9. Mosconi, Rocco & Giannini, Carlo, 1992. "Non-causality in Cointegrated Systems: Representation Estimation and Testing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 399-417, August.
  10. Svensson, Lars E.O., 1997. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," Seminar Papers 615, Stockholm University, Institute for International Economic Studies.
  11. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-44, January.
  12. Ben Bernanke, 1990. "The Federal Funds Rate and the Channels of Monetary Transnission," NBER Working Papers 3487, National Bureau of Economic Research, Inc.
  13. Gabriel Fagan & JÊrÆme Henry, 1998. "Long run money demand in the EU: Evidence for area-wide aggregates," Empirical Economics, Springer, vol. 23(3), pages 483-506.
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