Admissible monetary aggregates for the euro area

Jane M. Binner; Rakesh Bissoondeeal; C. Thomas Elger; Barry E. Jones; Andrew W. Mullineaux

doi:10.1016/j.jimonfin.2008.07.007

Admissible monetary aggregates for the euro area

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

Research output: Contribution to journal › Article › peer-review

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.

Original language	English
Pages (from-to)	99-114
Number of pages	16
Journal	Journal of International Money and Finance
Volume	28
Issue number	1
DOIs	https://doi.org/10.1016/j.jimonfin.2008.07.007
Publication status	Published - Feb 2009

Keywords

weak separability tests
IS curve
euro area
divisia aggregates
forecasting

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10.1016/j.jimonfin.2008.07.007

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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.",

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AU - Binner, Jane M.

AU - Bissoondeeal, Rakesh

AU - Elger, C. Thomas

AU - Jones, Barry E.

AU - Mullineaux, Andrew W.

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AB - 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.

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KW - IS curve

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KW - divisia aggregates

KW - forecasting

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DO - 10.1016/j.jimonfin.2008.07.007

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VL - 28

SP - 99

EP - 114

JO - Journal of International Money and Finance

JF - Journal of International Money and Finance

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Admissible monetary aggregates for the euro area

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