DP8957 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, Barbara Roffia |
| Publication Date: | May 2012 |
| Keyword(s): | Euro area money demand, inflation forecasts, monetary policy, portfolio allocation |
| JEL(s): | E4, E44 |
| Programme Areas: | International Macroeconomics |
| Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=8957 |
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.