On money and output in the euro area: Is money redundant?

Costas Karfakis

Discussion Paper Series from Department of Economics, University of Macedonia

Abstract: The relationship between money and output in the euro area is tested in the context of a two-equation model. An interesting aspect of the empirical analysis is the evidence that the real M3 has a correctly signed and statistically significant impact on business cycle fluctuations, given the real interest rate and foreign output. This finding supports the argument made by proponents of monetarism that the effects of monetary policy actions on the real economy are not fully captured by the short-term real interest rate.

Keywords: Output gap; real money; real interest rate; simultaneous equations methods. (search for similar items in EconPapers)
JEL-codes: E32 E51 E52 E58 (search for similar items in EconPapers)
Date: 2011-01, Revised 2011-01
New Economics Papers: this item is included in nep-cba, nep-cis, nep-eec, nep-mac and nep-mon
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