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Does money growth Granger-cause inflation in the Euro area?
Berger, Helge ;  Österholm, Pär ;  Universität <Berlin, Freie Universität> / Fachbereich Wirtschaftswissenschaft

Main titleDoes money growth Granger-cause inflation in the Euro area?
SubtitleEvidence from output-of-sample forecasts using Bayesian VARs
AuthorBerger, Helge
AuthorÖsterholm, Pär
InstitutionUniversität <Berlin, Freie Universität> / Fachbereich Wirtschaftswissenschaft
No. of Pages31 S.
Series Diskussionsbeiträge des Fachbereichs Wirtschaftswissenschaft ; 2008/10 : Volkswirtschaftliche Reihe
KeywordsBayesian VAR, Out-of-sample Forecasting, Granger Causality, Monetary Aggregates, Inflation, Monetary Policy, European Central Bank
Classification (DDC)337 International economics
339 Macroeconomics and related topics
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AbstractWe use a mean-adjusted Bayesian VAR model as an out-of-sample forecasting tool to test whether money growth Granger-causes inflation in the euro area. Based on data from 1970 to 2006 and forecasting horizons of up to 12 quarters, there is surprisingly strong evidence that including money improves forecasting accuracy. The results are very robust with regard to alternative treatments of priors and sample periods. That said, there is also reason not to overemphasize the role of money. The predictive power of money growth for inflation is substantially lower in more recent sample periods
compared to the 1970s and 1980s. This cautions against using money-based inflation models anchored in very long samples for policy advice.
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FU DepartmentDepartment Business and Economics
Other affiliation(s)Lehrstuhl für Geldtheorie und Geldpolitik
Year of publication2008
Type of documentBook
LanguageEnglish
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Created at2009-08-04 : 10:11:08
Last changed2014-01-23 : 04:20:10
 
Static URLhttp://edocs.fu-berlin.de/docs/receive/FUDOCS_document_000000002813
ISBN3-938369-81-7
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