European Business Schools Librarian's Group

ESSEC Working Papers,
ESSEC Research Center, ESSEC Business School

No DR 08012: Money in the Inflation Equation: the Euro Area Evidence

André Fourçans () and Radu Vranceanu ()
Additional contact information
André Fourçans: ESSEC Business School, Postal: Avenue Bernard Hirsch - B.P. 50105, 95021 CERGY-PONTOISE Cedex , FRANCE,
Radu Vranceanu: ESSEC Business School, Postal: Avenue Bernard Hirsch - B.P. 50105, 95021 CERGY-PONTOISE Cedex , FRANCE,

Abstract: The ECB is the only major central bank that still emphasizes the role of money in monetary policy management. In this paper, we bring some support to this approach. Taking into account Euro area data from the period between 1999 and 2007, we demonstrate that a steady 10 per cent increase in M3 may result in an inflation rate of approximately 2½ percentage points. A negative output gap would have a short term offsetting effect, and vice versa.

Keywords: ECB; Inflation; Monetary Policy; Money

JEL-codes: E31; E51; E58

11 pages, May 2008

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