Arbeitspapier

Money and Inflation: The Role of Persistent Velocity Movements

While the long run relation between money and inflation is well established, empirical evidence on the adjustment to the long run equilibrium is very heterogeneous. In the present paper we use a multivariate state space framework, that substantially expands the traditional vector error correction approach, to analyze the short run impact of money on prices. We contribute to the literature in three ways: First, we distinguish changes in velocity of money that are due to institutional developments and thus do not induce inflationary pressure, and changes that reflect transitory movements in money demand. This is achieved with a newly developed multivariate unobserved components decomposition. Second, we analyze whether the high volatility of the transmission from monetary pressure to inflation follows some structure, i.e., if the parameter regime can assumed to be constant. Finally, we use our model to illustrate the consequences of the monetary policy of the Fed that has been employed to mitigate the impact of the financial crisis, simulating different exit strategy scenarios.

Sprache
Englisch

Erschienen in
Series: IWH Discussion Papers ; No. 2/2010

Klassifikation
Wirtschaft
Price Level; Inflation; Deflation
Monetary Policy
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Thema
multivariate state space model
inflation
money
Umlaufsgeschwindigkeit
multivariates Zustandsraummodell
Inflation
Geldmenge
Geldumlaufgeschwindigkeit
Zustandsraummodell
Geldmenge
Inflation
Schätzung
Geldpolitik
Finanzmarktkrise
Reaktionsfunktion
USA

Ereignis
Geistige Schöpfung
(wer)
El-Shagi, Makram
Giesen, Sebastian
Ereignis
Veröffentlichung
(wer)
Leibniz-Institut für Wirtschaftsforschung Halle (IWH)
(wo)
Halle (Saale)
(wann)
2010

Handle
URN
urn:nbn:de:101:1-2010031934
Letzte Aktualisierung
10.03.2025, 11:44 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • El-Shagi, Makram
  • Giesen, Sebastian
  • Leibniz-Institut für Wirtschaftsforschung Halle (IWH)

Entstanden

  • 2010

Ähnliche Objekte (12)