Euro Area Money Demand and International Portfolio Allocation: A Contribution to Assessing Risks to Price Stability

Roberto De Santis (), Carlo Favero () and Barbara Roffia

No 432, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: This paper argues that a stable broad money demand for the euro area over the period 1980-2011 can be obtained by modelling cross border international portfolio allocation. As a consequence, model-based excess liquidity measures, namely the difference between actual M3 growth (net of the inflation objective) and the expected money demand trend dynamics, can be useful to predict HICP inflation. Keywords: Euro area money demand, inflation forecasts, monetary policy, portfolio allocation JEL classification: E41, E44, E52, G11, G15

Date: 2012
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Related works:
Journal Article: Euro area money demand and international portfolio allocation: A contribution to assessing risks to price stability (2013)
Working Paper: Euro Area Money Demand and International Portfolio Allocation: A Contribution to Assessing Risks to Price Stability (2012)
Working Paper: Euro area money demand and international portfolio allocation: a contribution to assessing risks to price stability (2008)
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