The Information Content of M3 for Future Inflation

32 Pages Posted: 19 Oct 2001

Date Written: October 2000


This paper analyzes the possibility to generate indeterminacy and equilibria with short-run non-neutrality of money in a model with flexible prices, constant returns to scale in production and constant money growth rules. The model recovers previous results in the literature as particular cases. It is shown that real effects of monetary shocks, as observed in the data, can arise in four regions of the parameter space. Two regions are characterized by unreasonable assumptions, which lead to inferiority of consumption or leisure. Two regions are characterized by reasonable assumptions and by normality of the goods. However, real effects of monetary shocks require implausible parameter values.

Keywords: Indeterminacy, Neutrality of Money, Transactions Costs

JEL Classification: C32, C50, E30, E40

Suggested Citation

Trecroci, Carmine and Vega-Croissier, Juan Luis, The Information Content of M3 for Future Inflation (October 2000). Available at SSRN: or

Carmine Trecroci (Contact Author)

University of Brescia ( email )

Via San Faustino 74B
Brescia, 25122

Juan Luis Vega-Croissier

Europaische Zentralbank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

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