Does money matter for U.S. inflation? Evidence from Bayesian VARs

No 2008/9, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: We use Bayesian estimation techniques to investigate whether money growth Granger-causes inflation in the United States. We test for Granger-causality out-of-sample and find, perhaps surprisingly given recent theoretical arguments, that including money growth in simple VAR models of inflation does systematically improve out-of-sample forecasting accuracy. This holds for a long forecasting sample 1960-2005, as well for more recent subperiods, including the Volcker and Greenspan eras. However, the contribution of money to inflation forecasting accuracy is quantitatively limited and tends to be smaller in recent subperiods, in particular in models that also include information on real GDP growth and interest rates.

Keywords: Out-of-sample forecasting; granger causality; monetary aggregates; monetary policy; Volcker; Greenspan (search for similar items in EconPapers)
JEL-codes: E47 E52 E58 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/28075/1/57153550X.PDF (application/pdf)

Related works:
Journal Article: Does Money matter for U.S. Inflation? Evidence from Bayesian VARs (2011)
Working Paper: Does Money Matter for U.S. Inflation? Evidence from Bayesian VARs (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:20089

Access Statistics for this paper

More papers in Discussion Papers from Free University Berlin, School of Business & Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().