Does the P* Model Provide Any Rationale for Monetary Targeting?

Lars Svensson

German Economic Review, 2000, vol. 1, issue 1, 69-81

Abstract: The so-called P* model is frequently used or referred to in discussions of monetary targeting. This gives the impression that the P* model might provide some rationale for monetary targeting or for the monetary reference value used by the Eurosystem. The P* model implies that inflation is determined by the level of and changes in the `real money gap' (the deviation of current real balances from their long-run equilibrium level), and hence that the real money gap is an important indicator for future inflation. Nevertheless, the P* model does not seem to provide any rationale for either a Bundesbank-style money-growth target or a Eurosystemstyle money-growth indicator.

Date: 2000
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Journal Article: Does the P* Model Provide Any Rationale for Monetary Targeting? (2000)
Working Paper: Does the P* Model Provide Any Rationale for Monetary Targeting? (2000)
Working Paper: Does the P* Model Provide Any Rationale for Monetary Targeting? (1999)
Working Paper: Does the P* Model Provide any Rationale for Monetary Targeting (1999)
Working Paper: Does the P* Model provide Any Rationale for Monetary Targeting? (1999)
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DOI: 10.1111/1468-0475.00005

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