Money as an indicator variable for monetary policy when money demand is forward looking

Arbeitspapier

This paper studies the gain from using money as an indicator when monetary policy in made under data uncertainty.We use a forward and backward looking model, calibrated for the euro area.The policymaker cannot completely observe the state of the economy. Money reveals some of the private sector's information to the policymaker, especially if there is a forward looking element in money demand.We show that observing money can considerably reduce the loss that is due to incomplete information.However, taking also into account other financial market data could decrease the marginal importance of money as an indicator.

Object Details

• ISBN: 952-462-047-2
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bank of Finland Discussion Papers ; No. 9/2003

Classification and Topics

• Classification: Wirtschaft ; Monetary Policy ; Central Banks and Their Policies ; Money and Interest Rates: Forecasting and Simulation: Models and Applications
• Subject: monetary policy ; partial information ; money ; monetary aggregates ; euro area

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kajanoja, Lauri
• Event: Veröffentlichung
• (who): Bank of Finland
• (where): Helsinki
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/211942
• Last update: 10.03.2025, 11:43 AM CET