Data uncertainty and the role of money as an information variable for monetary policy

In this study, we perform a quantitative assessment of the role of money as an indicator variable for monetary policy in the euro area. We document the magnitude of revisions to euro area-wide data on output, prices, and
In this study, we perform a quantitative assessment of the role of money as an indicator variable for monetary policy in the euro area. We document the magnitude of revisions to euro area-wide data on output, prices, and money, and find that monetary aggregates have a potentially significant role in providing information about current real output. We then proceed to analyze the information content of money in a forward-looking model in which monetary policy is optimally determined subject to incomplete information about the true state of the economy. We show that monetary aggregates may have substantial information content in an environment with high variability of output measurement errors, low variability of money demand shocks, and a strong contemporaneous linkage between money demand and real output. As a practical matter, however, we conclude that money has fairly limited information content as an indicator of contemporaneous aggregate demand in the euro area. Klassifikation: E31, E52, E58, E61
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Metadaten
Author:Günter Coenen, Andrew Levin, Volker Wieland
URN:urn:nbn:de:hebis:30-10123
Series (Serial Number):CFS working paper series (2003, 07)
Document Type:Working Paper
Language:English
Date of Publication (online):2005/06/13
Year of first Publication:2003
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2005/06/13
Tag:Kalman filter ; euro area ; macroeconomic modelling ; measurement error ; monetary policy rules ; rational expectations
Source:CFS working paper ; 2003,07
HeBIS PPN:211250090
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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