A case for money in the ECB monetary policy strategy

Horst Löchel and Thorsten Polleit

No 61, Frankfurt School - Working Paper Series from Frankfurt School of Finance and Management

Abstract: One major outcome of the review of the ECB's 'two pillar monetary policy strategy', which was published on 8 May 2003, has been the de facto downgrading of the hitherto prominent role assigned to the stock of money. According to the authors' judgement, however, there is a strong theoretical and empirical rationale for the ECB monetary policy to pay close attention to the information content of money in the form of M3. However, the authors argue the ECB should make use of the so-called 'price gap' or 'real money gap' concept rather than the reference value as the latter runs the risk of giving misleading policy recommendations and compromising the indicator quality of the stock of money. Making use of M3 seems all the more rational as currently no better inflation indicator appears to exist in providing inflation forecasts in the euro area.

Keywords: P-star; real money gap; excess liquidity; ECB (search for similar items in EconPapers)
JEL-codes: E41 E51 E61 (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/27821/1/498525309.PDF (application/pdf)

Related works:
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:zbw:fsfmwp:61

Access Statistics for this paper

More papers in Frankfurt School - Working Paper Series from Frankfurt School of Finance and Management Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().