Does Money Help Predict Inflation? An Empirical Assessment for Central Europe
Lubos Komarek () and
Working Papers from Czech National Bank
This paper investigates the predictive ability of money for future inflation in the Czech Republic, Hungary, Poland, and Slovakia. We construct monetary indicators similar to those the ECB regularly uses for monetary analysis. We find some in-sample evidence that money matters for future inflation at the policy horizons that central banks typically focus on, but our pseudo out-of-sample forecasting exercise shows that money does not in general improve the inflation forecasts vis-Ã -vis some benchmark models, such as the autoregressive process. Since at least some models containing money improve the inflation forecasts in certain periods, we argue that money still serves as a useful cross-check for monetary policy analysis.
Keywords: Central Europe; forecasting; inflation; money. (search for similar items in EconPapers)
JEL-codes: E41 E47 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-for, nep-mac, nep-mon and nep-tra
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Journal Article: Does money help predict inflation? An empirical assessment for Central Europe (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:cnb:wpaper:2010/05
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