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Does the P* Model Provide any Rationale for Monetary Targeting?
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
1999 (English)Report (Other academic)
Abstract [en]

The so-called P* model is frequently used or referred to in discussions of monetary teargeting. This gives the impression that the P* model might provide some rationale for monetary targeting or for the monetary reference value used by the Eurosystem. The P* modelimplies that inflation is determined by the level of and changes in the "real money gap" (the deviation of current real balances from their long-run equilibrium level), and hence that the real money gap is an important indicator for future inflation. Nevertheless, the P* model does not seem to provide any rationale for either a Bundesbank-style money-growth target or a Eurosystem-style money-growth indicator.

Place, publisher, year, edition, pages
Stockholm: IIES , 1999. , 21 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 671
Keyword [en]
real balances, reference value, inflation targeting
National Category
URN: urn:nbn:se:su:diva-41096OAI: diva2:328304
Available from: 2010-07-02 Created: 2010-07-02 Last updated: 2010-08-16Bibliographically approved

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Svensson, Lars E.O.
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