Does Money Lead Inflation in the Euro Area?

By S. Altimari. Social Science Research Network, 2001

219 citations recorded by the source corpus.

This paper investigates the properties of monetary and credit aggregates as indicators for future price developments in the euro area. The forecasting performance of models including indicators based on money and credit is assessed in a simulated out-of-sample forecasting exercise for forecast horizons varying from one quarter to three years ahead. The performance of these models is compared with that of models which include indicators based on financial markets, real activity, the labour market and various cost and price measures. The results support the idea that monetary and credit aggregates provide significant and independent information for future price developments in the euro area, especially at medium term horizons JEL Classification: E31, E40, C32

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/95f70bbda59517e8b1b07d591309ddc8e756748f

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Citations in the corpus

Data Uncertainty and the Role of Money as an Information Variable for Monetary Policy (2005, unknown): “6See, for instance, Nicoletti-Altimari (2001) who compares the performance of various indicators derived from monetary aggregates to the performance of alternative indicators based on economic and financial data such as output growth, the output gap, the unemployment rate and interest rate…”
Money in an Estimated Business Cycle Model of the Euro Area (2006, unknown): “This standard deviation for the natural rate is a much lower number than that estimated by Rotemberg and Woodford (1997) for the US (27%).”
A Tale of Two Decades: The Ecb's Monetary Policy at 20 (2019, background): “72 See Nicoletti-Altimari (2001) as a typical exercise of that time concluding that “the results support the idea that monetary and credit aggregates provide significant and independent information for future price developments in the euro area, especially at medium term horizons.”
Is the Demand for Euro Area M3 Stable? (2003, background): “…is only for the output equation that the test rejects constancy at the 5 percent level. information for improving the forecasts of inflation, e.g., two periods ahead; see, e.g., Vega and Trecroci (2002) for a study of the information content in M3 for future inflation and Nicoletti Altimari (2001).”
Assessing the predictive power of financial spreads in the euro area: does parameters instability matter? (2007, background): “Berk and Van Bergeijk 2000; Nicoletti-Altimari 2001 ).”
Assessing excess liquidity in the euro area: the role of sectoral distribution of money (2011, methodology): “…overhang’, which represent money stock deviations from measures of equilibrium money balances and have been shown to have higher predictive power for future inflation than money growth at horizons between 1 and 3 years (Nicoletti Altimari, 2001; Trecroci and Vega, 2002; Gerlach and Svensson, 2003).”
Modelling the Implied Probability of Stock Market Movements (2003, unknown): “Evidence for this linkage is the “flight to quality” effect, where a falling stock market leads investors to 20 See e.g. Nicoletti Altimari (2001). choose the lower risk and higher liquidity of government bonds.”
Background studies for the ECB's evaluation of its monetary policy strategy (2003, background): “See the background study by Castelnuovo, Nicoletti-Altimari and Rodríguez Palenzuela (2003), chapter 3, this volume.”
Aggregate Loans to the Euro Area Private Sector (2003, background): “However, it could be argued that these results may not be entirely reliable because of factors such as possible sample size distortions, the strongly downward trending behaviour of inflation over the period considered and the well-known low power of these tests in the presence of structural breaks (”
How the ECB and the US Fed set interest rates (2007, background): “This may reflect the leading indicator properties of money growth both for inflation (Altimari, 2001) and for the output gap (Coenen et al., 2001).”