Structural Filters for Monetary Analysis: The Inflationary Movements of Money in the Euro Area

33 Pages Posted: 20 May 2005

See all articles by Annick Bruggeman

Annick Bruggeman

National Bank of Belgium

Gonzalo Camba-Mendez

European Central Bank (ECB)

Björn Fischer

European Central Bank (ECB)

João Sousa

Banco de Portugal

Date Written: April 2005

Abstract

The quantity theory of money predicts a positive relationship between monetary growth and inflation over long-run horizons. However, in the short-run, transitory shocks to either money or inflation can obscure the inflationary signal stemming from money. The spectral analysis of time series provides filtering tools for removing fluctuations associated with certain frequency movements. However, use of these techniques in isolation is often criticised as being an oversimplistic statistical exercise potentially void of economic content. The objective of this paper is to develop 'structural' filtering techniques that rely on the use of spectral analysis in combination with a structural economic model with well identified shocks. A 'money augmented' Phillips curve that links inflation to money tightness and demand shocks of medium to long-term persistence is presented. It is shown that medium to long-term movements in inflation are mostly associated with the estimated monetary indicators.

Keywords: Inflation and Money

JEL Classification: E31, E50, C32

Suggested Citation

Bruggeman, Annick and Camba-Mendez, Gonzalo and Fischer, Björn and Sousa, João, Structural Filters for Monetary Analysis: The Inflationary Movements of Money in the Euro Area (April 2005). Available at SSRN: https://ssrn.com/abstract=691882

Annick Bruggeman (Contact Author)

National Bank of Belgium ( email )

Brussels, B-1000
Belgium

Gonzalo Camba-Mendez

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0044 69 1344 6000 (Fax)

Björn Fischer

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

João Sousa

Banco de Portugal ( email )

Rua Francisco Ribeiro, 2
Lisbon, 1150-165
Portugal

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
83
Abstract Views
1,048
rank
334,945
PlumX Metrics