Arbeitspapier
Money demand and the role of monetary indicators in forecasting euro area inflation
This paper examines the forecasting performance of a broad monetary aggregate (M3) in predicting euro area inflation. Excess liquidity is measured as the difference between the actual money stock and its fundamental value, the latter determined by a money demand function. The out-of sample forecasting performance is compared to widely used alternatives, such as the term structure of interest rates. The results indicate that the evolution of M3 is still in line with money demand even in the period of the financial and economic crisis. Monetary indicators are useful to predict inflation at the longer horizons, especially if the forecasting equations are based on measures of excess liquidity. Due to the stable link between money and inflation, central banks should implement exit strategies from the current policy path, as soon as the financial conditions are expected to return to normality.
- Sprache
-
Englisch
- Erschienen in
-
Series: DIW Discussion Papers ; No. 1064
- Klassifikation
-
Wirtschaft
Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
Model Evaluation, Validation, and Selection
Demand for Money
- Thema
-
Money demand
excess liquidity
money and inflation
Inflation
Prognoseverfahren
Geldnachfrage
Geldmenge
Monetärer Indikator
Eurozone
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Dreger, Christian
Wolters, Jürgen
- Ereignis
-
Veröffentlichung
- (wer)
-
Deutsches Institut für Wirtschaftsforschung (DIW)
- (wo)
-
Berlin
- (wann)
-
2010
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Dreger, Christian
- Wolters, Jürgen
- Deutsches Institut für Wirtschaftsforschung (DIW)
Entstanden
- 2010
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