Study Finds Money Growth Predicts Future Inflation Rates in Euro Area
The article analyzes how money growth in the Euro Area affects future inflation. By studying the relationship between money growth and inflation, considering factors like interest rates and output gap, the researchers found a strong connection between the two. They discovered that deviations in money growth from its average can predict future inflation changes. This suggests that a slightly above 5% growth rate in M3 is compatible with a stable inflation rate of 2%.