TY  - JOUR
AU  - Gerlach,Stefan
AU  - Svensson,Lars E.O.
TI  - Money and Inflation in the Euro Area: A Case for Monetary Indicators?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8025
PY  - 2000
Y2  - December 2000
UR  - http://www.nber.org/papers/w8025
L1  - http://www.nber.org/papers/w8025.pdf
N1  - Author contact info:
Stefan Gerlach
Department of Economics
Brandeis University
Waltham, MA   02154

Lars E.O. Svensson
Sveriges Riksbank
SE-103 37 Stockholm
SWEDEN
Tel: +46 8 787 0107
Fax: +46 8 21 0531
E-Mail: lars.svensson@iies.su.se
AB  - This paper studies the relationship between inflation, output, money and interest rates in the euro area, using data spanning 1980 2000. The P* model is shown to have considerable empirical support. Thus, the  price gap' or, equivalently, the  real money gap' (the gap between current real balances and long-run equilibrium real balances), has substantial predictive power for future inflation. The real money gap contains more information about future inflation than the output gap and the Eurosystem's money-growth indicator (the gap between current M3 growth and a reference value). The results suggest that the Eurosystem's money-growth indicator is an inferior indicator of future inflation.
ER  -