2  BIS Review 39/2006  in practice it has to date proved difficult to capture statistically, in a sufficiently reliable way, the longerterm price effects of monetary policy on the basis of available macroeconometric models.” 8 In recent years, several papers have come to the conclusion that monetary and credit aggregates – or variables which rely heavily on money growth such as the so-called “money gap” – provide valuable information for future inflation in the euro area.
This is particularly true for the longer forecasting horizon, confirming the claim that monetary development is key to understanding inflation in the long run. In a recent Bundesbank discussion paper, Boris Hofmann shows that the relationship between money and prices seems to continue.