Euro area money demand and international portfolio allocation: A contribution to assessing risks to price stability

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 o...

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Bibliographic Details
Published in:Journal of international money and finance 2013-02, Vol.32 (1), p.377-404
Main Authors: De Santis, Roberto A., Favero, Carlo A., Roffia, Barbara
Format: Article
Language:English
Subjects:
Economic models
Economic theory
Euro area money demand
Eurozone
Inflation
Inflation forecasts
International finance
Investment analysis
Monetary policy
Personal finance
Portfolio allocation
Portfolio management
Price stability
Price stabilization
Public finance
Risk assessment
Studies
Western Europe
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Summary: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.
ISSN:0261-5606
1873-0639
DOI:10.1016/j.jimonfin.2012.04.012