Money, Output and Inflation in the Longer Term: Major Industrial Countries, 1880-2001
Haug, Alfred A.; Dewald, William G.
We study how fluctuations in money growth correlate with fluctuations in real output growth and inflation. Using band-pass filters, we extract cycles from each time series that last 2 to 8 (business cycles) and 8 to 40 (longer-term cycles) years. We employ annual data, 1880-2001 without gaps, for eleven industrial countries. Fluctuations in money growth do not play a systematic role at business cycle frequencies. However, money growth leads or affects contemporaneously inflation, but not real output growth, in the longer run. Also, formal break tests indicate no structural changes for the longer-term money growth and inflation relationship, despite changes in policy regimes.
Publisher: Department of Economics, University of Otago
Series number: 1013
Keywords: Band-pass filters; role of monetary aggregates; longer-term cycles
Research Type: Discussion Paper