Is core money growth a good and stable inflation predictor in the euro area?

Please use this identifier to cite or link to this item: http://dspace.mediu.edu.my:8181/xmlui/handle/10419/17842

Title:	Is core money growth a good and stable inflation predictor in the euro area?
Keywords:	E58 E47 ddc:330 Forecasting core money growth stability filter Geldmenge Inflationsrate Prognoseverfahren Zeitreihenanalyse Schätzung Inflation Europäische Wirtschafts- und Währungsunion EU-Staaten
Issue Date:	16-Oct-2013
Publisher:	Kiel Institute for the World Economy (IfW) Kiel
Description:	In this paper, it is analyzed whether core money growth helps to predict future inflation in a useful and reliable way. Using an out-of-sample forecasting exercise and a stability analysis, it is shown that core money growth carries important information not contained in the inflation history, that its inclusion in a forecasting model can increase the forecasting accuracy, and that it has had a strong and stable long-run link to inflation over the last decades. A particularly promising forecasting model at all horizons is the one proposed by Gerlach (2004) that includes the inflation gap, the difference between core money growth and core inflation, and the output gap. This model has a very good track record, exhibits stable parameters over both the pre-EMU and the EMU era. What makes it appealing from a more theoretical perspective is that it relies on the stable long-run relationship between money growth and inflation.
URI:	http://koha.mediu.edu.my:8181/xmlui/handle/10419/17842
Other Identifiers:	http://hdl.handle.net/10419/17842 ppn:526073748
Appears in Collections:	EconStor

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