The information content of money in forecasting euro area inflation
Berger, Helge ;  Stavrev, Emil ;  ;  Universität <Berlin, Freie Universität> / Fachbereich Wirtschaftswissenschaft

Main titleThe information content of money in forecasting euro area inflation
AuthorBerger, Helge
AuthorStavrev, Emil
EditorUniversität <Berlin, Freie Universität> / Fachbereich Wirtschaftswissenschaft
No. of Pages31 S.
Series ; 2008,15 : Volkswirtschaftliche Reihe
KeywordsInformation content of money, inflation forecasting, New Keynesian model, DSGE model, P* model, Two-pillar Phillips curve, VAR model, general dynamic factor model, Bayesian estimation, euro area
Classification (DDC)337 International economics
339 Macroeconomics and related topics
Also published in
AbstractThis paper contributes to the debate on the role of money in monetary policy by analyzing the information content of money in forecasting euro-area inflation. We compare the predictive performance
within and among various classes of structural and empirical models in a consistent framework using
Bayesian and other estimation techniques. We find that money contains relevant information for inflation
in some model classes. Money-based New Keynesian DSGE models and VARs incorporating money
perform better than their cashless counterparts. But there are also indications that the contribution of
money has its limits. The marginal contribution of money to forecasting accuracy is often small, money
adds little to dynamic factor models, and it worsens forecasting accuracy of partial equilibrium models.
Finally, non-monetary models dominate monetary models in an all-out horserace.
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FU DepartmentDepartment Business and Economics
Other affiliation(s)Lehrstuhl für Geldtheorie und Geldpolitik
Year of publication2008
Type of documentBook
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Created at2009-08-05 : 08:36:45
Last changed2016-01-05 : 02:38:14
Static URLhttp://edocs.fu-berlin.de/docs/receive/FUDOCS_document_000000002826