Euro Area Money Demand and International Portfolio Allocation: A Contribution to Assessing Risks to Price Stability

48 Pages Posted: 25 May 2012

See all articles by Roberto A. De Santis

Roberto A. De Santis

European Central Bank (ECB) - Directorate General Economics

Carlo A. Favero

Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)

Barbara Roffia

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2012

Abstract

This paper argues that a stable broad money demand for the euro area over the period 1980-2011 can be obtained by modelling cross border international portfolio allocation. As a consequence, model-based excess liquidity measures, namely the difference between actual M3 growth (net of the inflation objective) and the expected money demand trend dynamics, can be useful to predict HICP inflation.

Keywords: Euro area money demand, inflation forecasts, monetary policy, portfolio allocation

JEL Classification: E4, E44

Suggested Citation

De Santis, Roberto A. and Favero, Carlo A. and Roffia, Barbara, Euro Area Money Demand and International Portfolio Allocation: A Contribution to Assessing Risks to Price Stability (May 2012). CEPR Discussion Paper No. DP8957. Available at SSRN: https://ssrn.com/abstract=2066330

Roberto A. De Santis (Contact Author)

European Central Bank (ECB) - Directorate General Economics ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Carlo A. Favero

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://www.igier.unibocconi.it\favero

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Barbara Roffia

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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