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Europe > Ireland

You are looking at 1 - 2 of 2 items for :

  • Type: Journal Issue x
  • Neoclassical school of economics x
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Cover IMF Working Papers
Investment in the Euro Area: Why Has It Been Weak?
Ms. Bergljot B Barkbu
,
Pelin Berkmen
,
Pavel Lukyantsau
,
Mr. Sergejs Saksonovs
, and
Hanni Schoelermann
Investment across the euro area remains below its pre-crisis level. Its performance has been weaker than in most previous recessions and financial crises. This paper shows that a part of this weakness can be explained by output dynamics, particularly before the European sovereign debt crisis. The rest is explained by a high cost of capital, financial constraints, corporate leverage, and uncertainty. There is a considerable cross country heterogeneity in terms of both investment dymanics and its determinants. Based on the findings of this paper, investment is expected to pick up as the recovery strengthens and uncertainty declines, but persistent financial fragmentation and high corporate leverage in some countries will likely continue to weigh on investment.
Keywords:
WP; investment; cash flow; investment dynamics; cost of capital; credit rationing; aggregate investment equation; area investment; investment model; investment performance; investment pattern; performance in Europe; equipment investment; investment equation; Stocks; Neoclassical theory; Currencies; Yield curve; Europe
Cover IMF Working Papers
Does Money Growth Granger-Cause Inflation in the Euro Area? Evidence from Out-of-Sample Forecasts Using Bayesian VARs
Pär Österholm
and
Mr. Helge Berger
We use a mean-adjusted Bayesian VAR model as an out-of-sample forecasting tool to test whether money growth Granger-causes inflation in the euro area. Based on data from 1970 to 2006 and forecasting horizons of up to 12 quarters, there is surprisingly strong evidence that including money improves forecasting accuracy. The results are very robust with regard to alternative treatments of priors and sample periods. That said, there is also reason not to overemphasize the role of money. The predictive power of money growth for inflation is substantially lower in more recent sample periods compared to the 1970s and 1980s. This cautions against using money-based inflation models anchored in very long samples for policy advice.
Keywords:
WP; money; Bayesian vector autoregressive; money growth