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Discussion Paper Details

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

Author(s): Roberto A De Santis, Carlo A. Favero and Barbara Roffia

Publication Date: May 2012

Keyword(s): Euro area money demand, inflation forecasts, monetary policy and portfolio allocation

Programme Area(s): International Macroeconomics

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.

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Bibliographic Reference

De Santis, R, Favero, C and Roffia, B. 2012. 'Euro Area Money Demand and International Portfolio Allocation: A Contribution to Assessing Risks to Price Stability'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8957