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Money in the Inflation Equation: the Euro Area Evidence

Andre Fourcans () and Radu Vranceanu ()

No DR 08012, ESSEC Working Papers from ESSEC Research Center, ESSEC Business School

Abstract: The ECB is the only major central bank that still emphasizes the role of money in monetary policy management. In this paper, we bring some support to this approach. Taking into account Euro area data from the period between 1999 and 2007, we demonstrate that a steady 10 per cent increase in M3 may result in an inflation rate of approximately 2½ percentage points. A negative output gap would have a short term offsetting effect, and vice versa.

Keywords: ECB; Inflation; Monetary Policy; Money (search for similar items in EconPapers)
JEL-codes: E31 E51 E58 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2008-05
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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