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

Lars Svensson

No 2198, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 Eurosystem-style money-growth indicator.

Keywords: Inflation Targeting; Real Balances; Reference Value (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 (search for similar items in EconPapers)
Date: 1999-08
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Citations: View citations in EconPapers (15)

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Related works:
Journal Article: Does the P* Model Provide Any Rationale for Monetary Targeting? (2000)
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)
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