Which Predictor is the Best to Predict Inflation in Europe: the Real Money-gap or a Nominal Money Based Indicator?

Gilles Dufrénot (), Roselyne Joyeux and Anne Péguin-Feissolle

No 606, Research Papers from Macquarie University, Department of Economics

Abstract: In the literature, two important views concerning the conduct of monetary policy are construed. One view is that the central banks’ monetary policy must be credible if the authorities want to curb inflation. A second view is that central banks set their monetary policy by using all the information relevant for inflation and output projections. In Europe, a controversy has emerged about the role of monetary aggregates as useful indicators of future inflation and output. On one hand, evidence in favour of the usefulness of nominal monetary aggregates as good predictors is provided by the literature. On the other hand, empirical evidence in favour of real money indicators is found. The purpose of this paper is to contribute to the ongoing debate on the role of money aggregates in the setting of monetary policy. The question we are interested in is whether the real money gap contains more information about future inflation in Europe, than an indicator based on the growth rate of nominal money. We use a panel data framework instead of the usual time series methods on aggregate Euro data.

Keywords: monetary policy; inflation; panel data (search for similar items in EconPapers)
JEL-codes: C23 C53 E42 E52 E58 (search for similar items in EconPapers)
Pages: 29 pages.
Date: 2006-10
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.econ.mq.edu.au/research/2006/6_2006Joyeuxetal.pdf First Version, 2006 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.econ.mq.edu.au:80 (No such host is known. )

Related works:
Working Paper: Which predictor is the best to predict inflation in Europe: the real money-gap or a nominal money based indicator? (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mac:wpaper:0606

Access Statistics for this paper

More papers in Research Papers from Macquarie University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Helen Boneham ( this e-mail address is bad, please contact ).