Inflation and core money growth in the euro area

Arbeitspapier

This paper studies the importance of money for inflation in the euro area. An inflation equation is derived from a small model that combines the supply and demand for money with a Phillips curve and the assumption that inflation expectations develop adaptively. The model's solution attributes an impact on inflation not to actual money growth but to its core component. The core component is defined as the long-lasting, low-frequency component of nominal money growth in excess of real money demand. Using quarterly euro area data from the 1980-2004 period we apply different filters (Hodrick-Prescott, Baxter-King, wavelets) as empirical measures of core money. The estimation results uniformly indicate that inflation and core money growth are closely linked, exhibiting a one-to-one relationship in the long-run. Higher-frequency money growth, in contrast, contributes nil to the explanation of actual inflation. As a stylised fact regarding frequency domain properties, cycles of money growth below eight years are found to be insignificant for inflation.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Discussion Paper Series 1 ; No. 2004,36

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems ; Price Level; Inflation; Deflation ; Central Banks and Their Policies ; Monetary Policy
• Thema: ECB ; inflation ; quantity theory ; frequency analysis ; Hodrick-Prescott filter ; band pass filter ; wavelets ; Geldmenge ; Inflation ; Inflationserwartung ; Phillips-Kurve ; Quantitätstheorie ; Schätzung ; Theorie ; Europäische Wirtschafts- und Währungsunion ; EU-Staaten

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Neumann, Manfred J. M. ; Greiber, Claus
• Ereignis: Veröffentlichung
• (wer): Deutsche Bundesbank
• (wo): Frankfurt a. M.
• (wann): 2004

Weitere Informationen

• Handle: http://hdl.handle.net/10419/19503
• Letzte Aktualisierung: 10.03.2025, 11:46 MEZ