Admissible monetary aggregates for the euro area

Jane M. Binner, Rakesh K. Bissoondeeal, C. Thomas Elger, Barry E. Jones, Andrew W. Mullineux

    Research output: Contribution to journalArticlepeer-review

    10 Citations (Scopus)

    Abstract

    We use the Fleissig and Whitney [Fleissig, A.R., Whitney, G.A., 2003. A new PC-based test for Varian's weak separability conditions. Journal of Business and Economics Statistics 21 (1), 133-144] weak separability test to determine admissible levels of monetary aggregation for the Euro area. We find that the Euro area monetary assets in M2 and M3 are weakly separable and construct admissible Divisia monetary aggregates for these assets. We show that real growth of the admissible Divisia aggregates enters the Euro area IS curve positively and significantly for the period from 1980 to 2005. Out of sample, we show that Divisia M2 and M3 appear to contain useful information for forecasting Euro area inflation. (c) 2008 Elsevier Ltd. All rights reserved.
    Original languageEnglish
    Pages (from-to)99-114
    Number of pages16
    JournalJournal of International Money and Finance
    Volume28
    Issue number1
    DOIs
    Publication statusPublished - 1 Feb 2009

    Keywords

    • Euro area
    • IS curve
    • Forecasting
    • Divisia aggregates
    • Weak separability tests

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