IDEAS home Printed from https://ideas.repec.org/p/bre/wpaper/854.html
   My bibliography  Save this paper

Does Money Matter in the Euro area? Evidence from a new Divisia Index

Author

Listed:
  • Zsolt Darvas

Abstract

The purpose of this paper is to examine the possible role of money shocks on output and prices in the euro area. Since no Divisia monetary aggregates are available for the euro area, we first create and make available a database on euro-area Divisia monetary aggregates. We plan to update the dataset in the future and keep it publicly available. Using different SVAR models, we find sensible and statistically significant...

Suggested Citation

  • Zsolt Darvas, 2014. "Does Money Matter in the Euro area? Evidence from a new Divisia Index," Working Papers 854, Bruegel.
    • Handle: RePEc:bre:wpaper:854
    as

    Download full text from publisher

    File URL: https://www.bruegel.org/wp-content/uploads/imported/publications/WP_2014_12_update_0415.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Zsolt Darvas & Balẳ Varga, 2014. "Inflation persistence in central and eastern European countries," Applied Economics, Taylor & Francis Journals, vol. 46(13), pages 1437-1448, May.
    2. William A. Barnett, 2011. "Multilateral Aggregation-Theoretic Monetary Aggregation over Heterogeneous Countries," World Scientific Book Chapters, in: Financial Aggregation And Index Number Theory, chapter 6, pages 167-206, World Scientific Publishing Co. Pte. Ltd..
    3. Zsolt Darvas, 2010. "The case for reforming euro area entry criteria," Society and Economy, Akadémiai Kiadó, Hungary, vol. 32(2), pages 195-219, December.
    4. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    5. Makram El-shagi & Logan J Kelly, 2014. "Liquidity in the liquidity crisis: evidence from Divisia monetary aggregates in Germany and the European crisis countries," Economics Bulletin, AccessEcon, vol. 34(1), pages 63-72.
    6. Michael T. Belongia & Peter N. Ireland, 2015. "Interest Rates and Money in the Measurement of Monetary Policy," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 33(2), pages 255-269, April.
    7. Eric M. Leeper & Jennifer E. Roush, 2003. "Putting \\"M\\" back in monetary policy," Proceedings, Federal Reserve Bank of Cleveland, pages 1217-1264.
    8. Livio Stracca, 2004. "Does Liquidity Matter? Properties of a Divisia Monetary Aggregate in the Euro Area," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(3), pages 309-331, July.
    9. William A. Barnett, 2000. "Economic Monetary Aggregates: An Application of Index Number and Aggregation Theory," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 11-48, Emerald Group Publishing Limited.
    10. Binner, Jane M. & Bissoondeeal, Rakesh K. & Elger, C. Thomas & Jones, Barry E. & Mullineux, Andrew W., 2009. "Admissible monetary aggregates for the euro area," Journal of International Money and Finance, Elsevier, vol. 28(1), pages 99-114, February.
    11. Zsolt Darvas, 2011. "Beyond the Crisis: Prospects for Emerging Europe," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 53(2), pages 261-290, June.
    12. Reimers, Hans-Eggert, 2002. "Analysing Divisia Aggregates for the Euro Area," Discussion Paper Series 1: Economic Studies 2002,13, Deutsche Bundesbank.
    13. Zsolt Darvas, 2011. "Exchange Rate Policy and Economic Growth after the Financial Crisis in Central and Eastern Europe," Working Papers 1103, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
    14. Keating, John W. & Kelly, Logan J. & Valcarcel, Victor J., 2014. "Solving the price puzzle with an alternative indicator of monetary policy," Economics Letters, Elsevier, vol. 124(2), pages 188-194.
    15. William A. Barnett, 2000. "The User Cost of Money," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 6-10, Emerald Group Publishing Limited.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Neepa Gaekwad & William Barnett, 2024. "Multilateral Divisia monetary aggregates for the Euro area," Economics Bulletin, AccessEcon, vol. 44(3), pages 1224-1241.
    2. Ghosh, Taniya & Bhadury, Soumya, 2018. "Money's causal role in exchange rate: Do divisia monetary aggregates explain more?," International Review of Economics & Finance, Elsevier, vol. 57(C), pages 402-417.
    3. Matteo Farnè & Angela Montanari, 2022. "A Bootstrap Method to Test Granger-Causality in the Frequency Domain," Computational Economics, Springer;Society for Computational Economics, vol. 59(3), pages 935-966, March.
    4. Neepa Gaekad & William A. Barnett, 2024. "Multilateral Divisia Monetary Aggregates for the Euro Area," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 202416, University of Kansas, Department of Economics.
    5. Mehmet Ezer, 2019. "Do Monetary Aggregates Belong In A Monetary Model? Evidence From The Uk," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 22(4), pages 509-530, December.
    6. Taniya Ghosh & Prashant Mehul Parab, 2019. "Testing the Friedman-Schwartz hypothesis using time varying correlation," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2019-001, Indira Gandhi Institute of Development Research, Mumbai, India.
    7. Maximilian C. Brill & Dieter Nautz & Lea Sieckmann, 2021. "Divisia monetary aggregates for a heterogeneous euro area," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(1), pages 247-278, February.
    8. El-Shagi, Makram & Tochkov, Kiril, 2022. "Shadow of the colossus: Euro area spillovers and monetary policy in Central and Eastern Europe," Journal of International Money and Finance, Elsevier, vol. 120(C).
    9. William A. Barnett & Neepa B. Gaekwad, 2018. "The Demand for Money for EMU: a Flexible Functional Form Approach," Open Economies Review, Springer, vol. 29(2), pages 353-371, April.
    10. Barnett, William & Gaekwad, Neepa, 2021. "Multilateral Divisia monetary aggregates for the Euro Area," MPRA Paper 105528, University Library of Munich, Germany.
    11. Michael T. Belongia & Peter N. Ireland, 2022. "Strengthening the second pillar: a greater role for money in the ECB’s strategy," Applied Economics, Taylor & Francis Journals, vol. 54(1), pages 99-114, January.
    12. Barnett, William A. & Ghosh, Taniya & Adil, Masudul Hasan, 2022. "Is money demand really unstable? Evidence from Divisia monetary aggregates," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 606-622.
    13. Barlow, David, 2023. "The stability of UK households Divisia money balances," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 451-459.
    14. Ghosh, Taniya & Parab, Prashant Mehul, 2018. "Testing the Friedman and Schwartz Hypothesis using Time Varying Correlation Analysis," MPRA Paper 90628, University Library of Munich, Germany.
    15. Israr Ahmad Shah Hashmi & Arshad Ali Bhatti, 2019. "On the monetary measures of global liquidity," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-23, December.
    16. Hong, Puah & Leong, Choi-Meng & Mansor, Shazali & Lau, Evan, 2018. "Revisiting Money Demand in Malaysia: Simple-Sum versus Divisia Monetary Aggregates," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 52(2), pages 267-278.
    17. Moritz Pfeifer & Gunther Schnabl, 2024. "Monetary Policy, Divergence, and the Euro," CESifo Working Paper Series 11442, CESifo.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. El-Shagi, Makram & Tochkov, Kiril, 2022. "Shadow of the colossus: Euro area spillovers and monetary policy in Central and Eastern Europe," Journal of International Money and Finance, Elsevier, vol. 120(C).
    2. William A. Barnett & Neepa B. Gaekwad, 2018. "The Demand for Money for EMU: a Flexible Functional Form Approach," Open Economies Review, Springer, vol. 29(2), pages 353-371, April.
    3. Ryadh M. Alkhareif & William A. Barnett, 2012. "Divisia Monetary Aggregates for the GCC Countries," International Symposia in Economic Theory and Econometrics, in: Recent Developments in Alternative Finance: Empirical Assessments and Economic Implications, pages 1-37, Emerald Group Publishing Limited.
    4. Israr Ahmad Shah Hashmi & Arshad Ali Bhatti, 2019. "On the monetary measures of global liquidity," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-23, December.
    5. William A. Barnett & Van H. Nguyen, 2021. "Constructing Divisia Monetary Aggregates for Singapore," JRFM, MDPI, vol. 14(8), pages 1-15, August.
    6. Barry E. Jones & Livio Stracca, 2008. "Does Money Matter In The Is Curve? The Case Of The Uk," Manchester School, University of Manchester, vol. 76(s1), pages 58-84, September.
    7. Michael T. Belongia & Peter N. Ireland, 2022. "Strengthening the second pillar: a greater role for money in the ECB’s strategy," Applied Economics, Taylor & Francis Journals, vol. 54(1), pages 99-114, January.
    8. Chen, Zhengyang & Valcarcel, Victor J., 2021. "Monetary transmission in money markets: The not-so-elusive missing piece of the puzzle," Journal of Economic Dynamics and Control, Elsevier, vol. 131(C).
    9. Maximilian C. Brill & Dieter Nautz & Lea Sieckmann, 2021. "Divisia monetary aggregates for a heterogeneous euro area," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(1), pages 247-278, February.
    10. Jozsef Moczar, 2016. "Noether's Theorem and the Lie Symmetries of Goodwin-model," Working Papers 1601, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
    11. Binner, Jane M. & Bissoondeeal, Rakesh K. & Elger, C. Thomas & Jones, Barry E. & Mullineux, Andrew W., 2009. "Admissible monetary aggregates for the euro area," Journal of International Money and Finance, Elsevier, vol. 28(1), pages 99-114, February.
    12. Bissoondeeal, Rakesh K. & Karoglou, Michail & Binner, Jane M., 2019. "Structural changes and the role of monetary aggregates in the UK," Journal of Financial Stability, Elsevier, vol. 42(C), pages 100-107.
    13. William A. Barnett & Neepa Gaekwad, 2021. "Multilateral Divisia Monetary Aggregates for the Euro Area," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 202108, University of Kansas, Department of Economics, revised Jan 2021.
    14. Yemba, Boniface & Kitenge, Erick & Tang, Biyan & Gaekwad, Neepa B., 2024. "Monetary policy in China: A Factor Augmented VAR approach," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 975-1008.
    15. Serletis, Apostolos & Xu, Libo, 2020. "Functional monetary aggregates, monetary policy, and business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 121(C).
    16. Michael T. Belongia & Peter N. Ireland, 2021. "A Classical View of the Business Cycle," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(2-3), pages 333-366, March.
    17. Jones, Barry E. & Stracca, Livio, 2006. "Are money and consumption additively separable in the euro area? A non-parametric approach," Working Paper Series 704, European Central Bank.
    18. Rakesh K. Bissoondeeal & Barry E. Jones & Jane M. Binner & Andrew W. Mullineux, 2010. "Household‐Sector Money Demand For The Uk," Manchester School, University of Manchester, vol. 78(s1), pages 90-113, September.
    19. Binner, Jane M. & Chaudhry, Sajid & Kelly, Logan & Swofford, James L., 2018. "“Risky” monetary aggregates for the UK and US," Journal of International Money and Finance, Elsevier, vol. 89(C), pages 127-138.
    20. Barnett, William A. & Su, Liting, 2020. "Financial Firm Production Of Inside Monetary And Credit Card Services: An Aggregation Theoretic Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 24(1), pages 130-160, January.

    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bre:wpaper:854. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bruegel (email available below). General contact details of provider: https://edirc.repec.org/data/bruegbe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.