IDEAS home Printed from https://ideas.repec.org/p/fip/fedlwp/1992-001.html
   My bibliography  Save this paper

The P-star model and Austrian prices

Author

Listed:
  • John A. Tatom

Abstract

In the P-star model the price level is determined by the money stock per unit of potential output and the long-run equilibrium level of the velocity of money. This article applies this model to Austria. Problems in identifying permanent shocks to potential output and/or velocity lead to the rejection of such models of the price level, but their first-difference version is not so suspect. While evidence is found of a long-run relationship between Austria inflation and money growth, even the first-difference version of the P-star model is rejected for Austria. Since Austria is a small economy, closely tied to Germany, the article also investigates whether Austrian prices are tied to a German P-star measure. This hypothesis is also rejected, but there is a statistically significant long-run relationship between Austrian and German inflation. Moreover, Austrian money growth remains significant even in this relationship.

Suggested Citation

  • John A. Tatom, 1992. "The P-star model and Austrian prices," Working Papers 1992-001, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:1992-001
    as

    Download full text from publisher

    File URL: http://research.stlouisfed.org/wp/more/1992-001/
    Download Restriction: no

    File URL: http://research.stlouisfed.org/wp/1992/92-001.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    2. Hallman, Jeffrey J & Porter, Richard D & Small, David H, 1991. "Is the Price Level Tied to the M2 Monetary Aggregate in the Long Run?," American Economic Review, American Economic Association, vol. 81(4), pages 841-858, September.
    3. Heinz Gluck & Dieter Proske & John A. Tatom, 1992. "Monetary and exchange rate policy in Austria: an early example of policy coordination," Working Papers 1992-005, Federal Reserve Bank of St. Louis.
    4. Jeffrey J. Hallman & Richard D. Porter & David H. Small, 1989. "M2 per unit of potential GNP as an anchor for the price level," Staff Studies 157, Board of Governors of the Federal Reserve System (U.S.).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tödter, Karl-Heinz, 2002. "Monetary indicators and policy rules in the P-star model," Discussion Paper Series 1: Economic Studies 2002,18, Deutsche Bundesbank.
    2. repec:onb:oenbwp:y::i:20:b:1 is not listed on IDEAS
    3. Mujeri, Mustafa Kamal & Shahiduzzaman , Md & Islam, Md Ezazul, 2009. "Application of the P?Star Model for Measuring Inflationary Pressure in Bangladesh," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 32(1), pages 1-22, March.
    4. Aurelijus Dabušinskas, 2005. "Money and Prices in Estonia," Bank of Estonia Working Papers 2005-07, Bank of Estonia, revised 10 Nov 2005.
    5. Johannes Groeneveld, 1998. "From the ERM with Love: Monetary Spillover Effects to Austria," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 25(3), pages 331-345, January.
    6. Hans Groeneveld, 1995. "Monetary Spill-over Effects in the ERM: The Case of Austria, a Former Shadow Member," Working Papers 20, Oesterreichische Nationalbank (Austrian Central Bank).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tödter, Karl-Heinz, 2002. "Monetary indicators and policy rules in the P-star model," Discussion Paper Series 1: Economic Studies 2002,18, Deutsche Bundesbank.
    2. Ericsson, Neil R & Hendry, David F & Mizon, Grayham E, 1998. "Exogeneity, Cointegration, and Economic Policy Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 370-387, October.
    3. Chaubal Aditi, 2018. "P-star model for India: a nonlinear approach," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 22(5), pages 1-28, December.
    4. Joseph Atta-Mensah, 1996. "A Modified P*-Model of Inflation Based on M1," Staff Working Papers 96-15, Bank of Canada.
    5. Michael T. Belongia & Peter N. Ireland, 2015. "Interest Rates and Money in the Measurement of Monetary Policy," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 33(2), pages 255-269, April.
    6. Ramey, Valerie, 1993. "How important is the credit channel in the transmission of monetary policy?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 1-45, December.
    7. Reza Anglingkusumo, 2005. "Money - Inflation Nexus in Indonesia: Evidence from a P-Star Analysis," Tinbergen Institute Discussion Papers 05-054/4, Tinbergen Institute.
    8. Ramya Hewarathna, 2000. "The P-Star Model in Australia and New Zealand," Working Papers 2000.07, School of Economics, La Trobe University.
    9. N. Kundan Kishor, 2012. "Modeling Inflation In India: The Role Of Money," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 57(04), pages 1-19.
    10. Ivars Tillers, 2004. "Money Demand in Latvia," Working Papers 2004/03, Latvijas Banka.
    11. Scheide, Joachim & Trabandt, Mathias, 2000. "Predicting inflation in Euroland: the Pstar approach," Kiel Working Papers 1019, Kiel Institute for the World Economy (IfW Kiel).
    12. J.M. Groeneveld & K.G. Koedijk & C.J.M. Kool, 1997. "Money, prices and the transition to EMU," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 50(203), pages 481-504.
    13. repec:onb:oenbwp:y::i:20:b:1 is not listed on IDEAS
    14. Martin Schmidt, 2003. "Money and prices: evidence from the G7 countries," Applied Economics, Taylor & Francis Journals, vol. 35(17), pages 1799-1809.
    15. Imad Moosa & Basil Al-Nakeeb, 2020. "An augmented P-Star model of US inflation," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(4), pages 555-566, December.
    16. Michael Graff, 2008. "The Quantity Theory of Money in Historical Perspective," KOF Working papers 08-196, KOF Swiss Economic Institute, ETH Zurich.
    17. Krämer, Jörg W., 1994. "Zinsgewichtete Geldmengenaggregate und Preisniveau," Kiel Working Papers 635, Kiel Institute for the World Economy (IfW Kiel).
    18. Javier Gómez & José Darío Uribe & Hernando Vargas, 2002. "The Implementation of Inflation Targeting in Colombia," Borradores de Economia 202, Banco de la Republica de Colombia.
    19. Abdul Qayyum & Faiz Bilquees, 2005. "P-Star Model: A Leading Indicator of Inflation for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(2), pages 117-129.
    20. David A. Dickey & Dennis W. Jansen & Daniel L. Thornton, 1994. "A Primer on Cointegration with an Application to Money and Income," Palgrave Macmillan Books, in: B. Bhaskara Rao (ed.), Cointegration, chapter 2, pages 9-45, Palgrave Macmillan.
    21. Jacek Kotlowski, 2005. "Money and prices in the Polish economy. Seasonal cointegration approach," Working Papers 20, Department of Applied Econometrics, Warsaw School of Economics.

    More about this item

    Keywords

    Money; Prices; Austria;
    All these keywords.

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:1992-001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anna Oates (email available below). General contact details of provider: https://edirc.repec.org/data/frbslus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.