Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152518
Authors: 
Coenen, Günter
Levin, Andrew T.
Wieland, Volker
Year of Publication: 
2001
Series/Report no.: 
ECB Working Paper 84
Abstract: 
This paper shows that money can play an important role as an information variable when initial output data are measured with error and subject to revision. Using an estimated model of the euro area we find that current output estimates may be substantially improved by including money growth in the information set. The gain in precision, however, depends on the magnitude of the output measurement error relative to the money demand shock. We find noticable but small improvements in output estimates, if the uncertainty due to money demand shocks corresponds to the estimated variance obtained from the money demand equation. Money plays a quantitatively more important role with regard to output estimation if we allow for a contribution of monetary analysis in reducing uncertainty due to money demand shocks. In this case, money also helps to reduce uncertainty about output forecasts
Subjects: 
euro area
Kalman filter
macroeconomic modelling
measurement error
monetary policy rules
Rational Expectations
JEL: 
E31
E52
E58
E61
Document Type: 
Working Paper

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