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Does Money Matter in the Euro area? Evidence from a new Divisia Index

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  • Zsolt Darvas
Abstract
The purpose of this paper is to examine the possible role of money shocks on output and prices in the euro area. Since no Divisia monetary aggregates are available for the euro area, we first create and make available a database on euro-area Divisia monetary aggregates. We plan to update the dataset in the future and keep it publicly available. Using different SVAR models, we find sensible and statistically significant...

Suggested Citation

  • Zsolt Darvas, 2014. "Does Money Matter in the Euro area? Evidence from a new Divisia Index," Working Papers 854, Bruegel.
    • Handle: RePEc:bre:wpaper:854
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    References listed on IDEAS

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    1. Zsolt Darvas & Balẳ Varga, 2014. "Inflation persistence in central and eastern European countries," Applied Economics, Taylor & Francis Journals, vol. 46(13), pages 1437-1448, May.
    2. 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..
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    9. William A. Barnett, 2000. "Economic Monetary Aggregates: An Application of Index Number and Aggregation Theory," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 11-48, Emerald Group Publishing Limited.
    10. 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.
    11. Zsolt Darvas, 2011. "Beyond the Crisis: Prospects for Emerging Europe," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 53(2), pages 261-290, June.
    12. Reimers, Hans-Eggert, 2002. "Analysing Divisia Aggregates for the Euro Area," Discussion Paper Series 1: Economic Studies 2002,13, Deutsche Bundesbank.
    13. Zsolt Darvas, 2011. "Exchange Rate Policy and Economic Growth after the Financial Crisis in Central and Eastern Europe," Working Papers 1103, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
    14. Keating, John W. & Kelly, Logan J. & Valcarcel, Victor J., 2014. "Solving the price puzzle with an alternative indicator of monetary policy," Economics Letters, Elsevier, vol. 124(2), pages 188-194.
    15. William A. Barnett, 2000. "The User Cost of Money," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 6-10, Emerald Group Publishing Limited.
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    Cited by:

    1. Neepa Gaekwad & William Barnett, 2024. "Multilateral Divisia monetary aggregates for the Euro area," Economics Bulletin, AccessEcon, vol. 44(3), pages 1224-1241.
    2. Ghosh, Taniya & Bhadury, Soumya, 2018. "Money's causal role in exchange rate: Do divisia monetary aggregates explain more?," International Review of Economics & Finance, Elsevier, vol. 57(C), pages 402-417.
    3. Matteo Farnè & Angela Montanari, 2022. "A Bootstrap Method to Test Granger-Causality in the Frequency Domain," Computational Economics, Springer;Society for Computational Economics, vol. 59(3), pages 935-966, March.
    4. Neepa Gaekad & William A. Barnett, 2024. "Multilateral Divisia Monetary Aggregates for the Euro Area," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 202416, University of Kansas, Department of Economics.
    5. Mehmet Ezer, 2019. "Do Monetary Aggregates Belong In A Monetary Model? Evidence From The Uk," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 22(4), pages 509-530, December.
    6. Taniya Ghosh & Prashant Mehul Parab, 2019. "Testing the Friedman-Schwartz hypothesis using time varying correlation," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2019-001, Indira Gandhi Institute of Development Research, Mumbai, India.
    7. Maximilian C. Brill & Dieter Nautz & Lea Sieckmann, 2021. "Divisia monetary aggregates for a heterogeneous euro area," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(1), pages 247-278, February.
    8. El-Shagi, Makram & Tochkov, Kiril, 2022. "Shadow of the colossus: Euro area spillovers and monetary policy in Central and Eastern Europe," Journal of International Money and Finance, Elsevier, vol. 120(C).
    9. William A. Barnett & Neepa B. Gaekwad, 2018. "The Demand for Money for EMU: a Flexible Functional Form Approach," Open Economies Review, Springer, vol. 29(2), pages 353-371, April.
    10. Barnett, William & Gaekwad, Neepa, 2021. "Multilateral Divisia monetary aggregates for the Euro Area," MPRA Paper 105528, University Library of Munich, Germany.
    11. Michael T. Belongia & Peter N. Ireland, 2022. "Strengthening the second pillar: a greater role for money in the ECB’s strategy," Applied Economics, Taylor & Francis Journals, vol. 54(1), pages 99-114, January.
    12. Barnett, William A. & Ghosh, Taniya & Adil, Masudul Hasan, 2022. "Is money demand really unstable? Evidence from Divisia monetary aggregates," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 606-622.
    13. Barlow, David, 2023. "The stability of UK households Divisia money balances," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 451-459.
    14. Ghosh, Taniya & Parab, Prashant Mehul, 2018. "Testing the Friedman and Schwartz Hypothesis using Time Varying Correlation Analysis," MPRA Paper 90628, University Library of Munich, Germany.
    15. Israr Ahmad Shah Hashmi & Arshad Ali Bhatti, 2019. "On the monetary measures of global liquidity," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-23, December.
    16. Hong, Puah & Leong, Choi-Meng & Mansor, Shazali & Lau, Evan, 2018. "Revisiting Money Demand in Malaysia: Simple-Sum versus Divisia Monetary Aggregates," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 52(2), pages 267-278.
    17. Moritz Pfeifer & Gunther Schnabl, 2024. "Monetary Policy, Divergence, and the Euro," CESifo Working Paper Series 11442, CESifo.

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    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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