Is the euro area M3 abandoning us?
This paper reassesses the role of the M3 aggregate for monetary policy purposes in the euro area. Using data until 2006Q4 it is shown that the M3 aggregate ceased to display the empirical properties that supported its prominent role in the ECB’s monetary policy strategy. On the one hand, when the most recent data are used in the analysis there is strong evidence of cointegration breakdown in the M3 money demand models as well as in the "two-pillar Phillips curves" with filtered data. On the other hand, the leading indicator properties of M3 for inflation in the area have also deteriorated markedly in the most recent years. This is supported by evidence both in the time and frequency domains.
|Date of creation:||2007|
|Contact details of provider:|| Postal: R. do Ouro, 27, 1100 LISBOA|
Phone: 21 321 32 00
Fax: 21 346 48 43
Web page: https://www.bportugal.pt
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Assenmacher-Wesche, Katrin & Gerlach, Stefan, 2006. "Understanding the Link between Money Growth and Inflation in the Euro Area," CEPR Discussion Papers 5683, C.E.P.R. Discussion Papers.
- José Ferreira Machado & João Sousa, 2006. "Identifying asset price booms and busts with quantile regressions," Working Papers w200608, Banco de Portugal, Economics and Research Department.
- Gunter Coenen & Andrew T. Levin & Volker W. Wieland, 2001.
"Data uncertainty and the role of money as an information variable for monetary policy,"
Finance and Economics Discussion Series
2001-54, Board of Governors of the Federal Reserve System (U.S.).
- 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.
- Coenen, Guenter & Levin, Andrew & Wieland, Volker, 2003. "Data Uncertainty and the Role of Money as an Information Variable for Monetary Policy," CFS Working Paper Series 2003/07, Center for Financial Studies (CFS).
- Coenen, Günter & Levin, Andrew T. & Wieland, Volker, 2001. "Data uncertainty and the role of money as an information variable for monetary policy," Working Paper Series 0084, European Central Bank.
- Coenen, Günter & Levin, Andrew & Wieland, Volker, 2003. "Data Uncertainty and the Role of Money as an Information Variable for Monetary Policy," CEPR Discussion Papers 3812, C.E.P.R. Discussion Papers.
- Warne, Anders & Bruggeman, Annick & Donati, Paola, 2003. "Is the demand for euro area M3 stable?," Working Paper Series 0255, European Central Bank.
- Carstensen, Kai, 2004.
"Is European Money Demand Still Stable?,"
Kiel Working Papers
1179, Kiel Institute for the World Economy (IfW).
- Carstensen, Kai, 2006.
"Stock market downswing and the stability of European monetary union money demand,"
Munich Reprints in Economics
19940, University of Munich, Department of Economics.
- Carstensen, Kai, 2006. "Stock Market Downswing and the Stability of European Monetary Union Money Demand," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 395-402, October.
- Daniel Levy, 2002.
"Cointegration in Frequency Domain,"
0209, Department of Economics, Emory University (Atlanta).
- Michael Dotsey & Carl D. Lantz & Lawrence Santucci, 2000. "Is money useful in the conduct of monetary policy?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 23-48.
- Assenmacher-Wesche, Katrin & Gerlach, Stefan, 2006.
"Interpreting Euro Area Inflation at High and Low Frequencies,"
CEPR Discussion Papers
5632, C.E.P.R. Discussion Papers.
- Assenmacher-Wesche, Katrin & Gerlach, Stefan, 2008. "Interpreting euro area inflation at high and low frequencies," European Economic Review, Elsevier, vol. 52(6), pages 964-986, August.
- Stefan Gerlach & Katrin Assenmacher-Wesche, 2006. "Interpreting Euro area inflation at high and low frequencies," BIS Working Papers 195, Bank for International Settlements.
- Coenen, Guenter & Vega, Juan Luis, 1999.
"The demand for M3 in the euro area,"
Working Paper Series
0006, European Central Bank.
- Gunter Coenen & Juan Luis Vega, 2000. "The Demand for M3 in the Euro Area," Econometric Society World Congress 2000 Contributed Papers 0976, Econometric Society.
- Carlos Robalo Marques & Nuno Alves & João Sousa, 2006. "Some Issues Concerning the Use of M3 for Monetary Policy Analysis in the Euro Area," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department, pages -.
- Trecroci, Carmine & Vega, Juan Luis, 2000. "The information content of M3 for future inflation," Working Paper Series 0033, European Central Bank.
- Bruggeman, Annick & Camba-Méndez, Gonzalo & Fischer, Björn & Sousa, João, 2005. "Structural filters for monetary analysis: the inflationary movements of money in the euro area," Working Paper Series 0470, European Central Bank.
- Christian Dreger & Jürgen Wolters, 2006. "Investigating M3 Money Demand in the Euro Area: New Evidence Based on Standard Models," Discussion Papers of DIW Berlin 561, DIW Berlin, German Institute for Economic Research.
- Dotsey, Michael & Hornstein, Andreas, 2003. "Should a monetary policymaker look at money?," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 547-579, April.
- Calza, Alessandro & Sousa, João, 2003. "Why has broad money demand been more stable in the euro area than in other economies? A literature review," Working Paper Series 0261, European Central Bank.
When requesting a correction, please mention this item's handle: RePEc:ptu:wpaper:w200720. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (DEE-NTDD)
If references are entirely missing, you can add them using this form.