Low-frequency determinants of inflation in the euro area

Sven Schreiber ()
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Sven Schreiber: Macroeconomic Policy Institute (IMK) at Hans Boeckler Foundation, Duesseldorf

No 6-2009, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: We use frequency-wise Granger-causality tests and error-correction models to investigate the driving forces behind longer-run inflation developments in the euro area. Employing an eclectic approach we consider various relevant theories. With a general-to-specific testing strategy we distill the unemployment rate and long-term interest rates as causal for low-frequency variations of inflation. Money growth is found to be causal for inflation only if other variables are omitted, which we therefore interpret as a spurious result.

Keywords: money growth; Granger causality; quantity theory (search for similar items in EconPapers)
JEL-codes: E31 E40 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2009
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:imk:wpaper:6-2009

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