Money and inflation in the Euro Area: A case for monetary indicators?

Lars Svensson and Stefan Gerlach (hms.gerlach@gmail.com)

No 98, BIS Working Papers from Bank for International Settlements

Abstract: This paper studies the relationship between inflation, output, money and interest rates in the euro area, using data spanning 1980-2000. The P model is shown to have considerable empirical support. Thus, the "price gap" or, equivalently, the "real money gap" (the gap between current real balances and long-run equilibrium real balances), has substantial predictive power for future inflation. The real money gap contains more information about future inflation than the output gap and the Eurosystem's money-growth indicator (the gap between current M3 growth and a reference value). The results suggest that the Eurosystem's money-growth indicator is an inferior indicator of future inflation.

JEL-codes: E42 E52 E58 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2001-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Related works:
Journal Article: Money and inflation in the euro area: A case for monetary indicators? (2003)
Working Paper: Money and Inflation in the Euro-Area: A Case for Monetary Indicators? (2002)
Working Paper: Money and Inflation in the Euro Area: A Case for Monetary Indicators? (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:98

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