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One Divisia money for Europe?

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  • Leigh Drake
  • Andy Mullineux
  • Juda Agung

Abstract

In 1992 the EU monetary authorities adopted a 'harmonized' broad money aggregate. The EMI was subsequently established to promote monetary policy coordination. This paper considers how broad money aggregates might be used to guide EU monetary policy and whether a 'Euro-Divisia' monetary index might provide a better guide than a 'Euro-simple-sum' aggregate. Our findings are based on data from the UK, France and Germany. They indicate that 'Euromoney' Granger-causes 'Europrices' and that the EuroDivisia monetary index is a better leading indicator of 'Euroinflation' than the Euro-simple-sum monetary aggregate.

Suggested Citation

  • Leigh Drake & Andy Mullineux & Juda Agung, 1997. "One Divisia money for Europe?," Applied Economics, Taylor & Francis Journals, vol. 29(6), pages 775-786.
    • Handle: RePEc:taf:applec:v:29:y:1997:i:6:p:775-786
    DOI: 10.1080/000368497326697
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    Cited by:

    1. William A. Barnett, 2011. "Multilateral Aggregation-Theoretic Monetary Aggregation over Heterogeneous Countries," World Scientific Book Chapters, in: Financial Aggregation And Index Number Theory, chapter 6, pages 167-206, World Scientific Publishing Co. Pte. Ltd..
    2. Stracca, Livio, 2001. "Does liquidity matter? Properties of a synthetic divisia monetary aggregate in the euro area," Working Paper Series 79, European Central Bank.
    3. Jane M. Binner & Alicia M. Gazely & Shu‐Heng Chen & Bin‐Tzong Chie, 2004. "Financial Innovation and Divisia Money in Taiwan: Comparative Evidence from Neural Network and Vector Error‐Correction Forecasting Models," Contemporary Economic Policy, Western Economic Association International, vol. 22(2), pages 213-224, April.
    4. Binner, J.M. & Tino, P. & Tepper, J. & Anderson, R. & Jones, B. & Kendall, G., 2010. "Does money matter in inflation forecasting?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(21), pages 4793-4808.
    5. J. M. Binner & R. K. Bissoondeeal & A. W. Mullineux, 2005. "A composite leading indicator of the inflation cycle for the Euro area," Applied Economics, Taylor & Francis Journals, vol. 37(11), pages 1257-1266.
    6. Barnett, William A., 2003. "Aggregation-theoretic monetary aggregation over the euro area, when countries are heterogeneous," Working Paper Series 260, European Central Bank.
    7. Jane Binner & Rakesh Bissoondeeal & Thomas Elger & Alicia Gazely & Andrew Mullineux, 2005. "A comparison of linear forecasting models and neural networks: an application to Euro inflation and Euro Divisia," Applied Economics, Taylor & Francis Journals, vol. 37(6), pages 665-680.
    8. Reimers, Hans-Eggert, 2002. "Analysing Divisia Aggregates for the Euro Area," Discussion Paper Series 1: Economic Studies 2002,13, Deutsche Bundesbank.
    9. Binner, Jane M. & Bissoondeeal, Rakesh K. & Elger, C. Thomas & Jones, Barry E. & Mullineux, Andrew W., 2009. "Admissible monetary aggregates for the euro area," Journal of International Money and Finance, Elsevier, vol. 28(1), pages 99-114, February.
    10. Reimers Hans-Eggert, 2003. "Does Money Include Information for Prices in the Euro Area? / Enthält Geld Informationen für die Preisentwicklung im Eurowährungsgebiet?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 223(5), pages 581-602, October.
    11. Jane Binner & Rakesh Bissoondeeal & Thomas Elger & Alicia Gazely & Andrew Mullineux, 2004. "Vector autoregressive models versus neural networks in forecasting: an application to Euro-inflation and divisia money," Money Macro and Finance (MMF) Research Group Conference 2003 5, Money Macro and Finance Research Group.
    12. Raghbendra Jha & Ibotombi Longjam, 2008. "A Divisia type saving aggregate for India," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 1(1), pages 51-66.

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