Money Growth And Inflation In The United States
AbstractSpecification tests reject a linear inflation forecasting model over the period 1959 2002. Based on this finding, we evaluate the out-of-sample inflation forecasts of a fully nonparametric model for 1994 2002. Our two main results are that: (i) nonlinear models produce much better forecasts than linear models, and (ii) including money growth in the nonparametric model yields marginal improvements, but including velocity reduces the mean squared forecast error by as much as 40%. A threshold model fits the data well over the full sample, offering an interpretation of our findings. We conclude that it is important to account for both nonlinearity and the behavior of monetary aggregates when forecasting inflation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Cambridge University Press in its journal Macroeconomic Dynamics.
Volume (Year): 11 (2007)
Issue (Month): 01 (February)
Contact details of provider:
Postal: The Edinburgh Building, Shaftesbury Road, Cambridge CB2 2RU UK
Fax: +44 (0)1223 325150
Web page: http://journals.cambridge.org/jid_MDYProvider-Email:email@example.com
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Berger, Helge & Österholm, Pär, 2007.
"Does Money Growth Granger-Cause Inflation in the Euro Area? Evidence from Out-of-Sample Forecasts Using Bayesian VARs,"
Working Paper Series
2007:30, Uppsala University, Department of Economics.
- Helge Berger & Pär Österholm, 2011. "Does Money Growth Granger Cause Inflation in the Euro Area? Evidence from Out‐of‐Sample Forecasts Using Bayesian VARs," The Economic Record, The Economic Society of Australia, vol. 87(276), pages 45-60, March.
- PÃ¤r Ã–sterholm & Helge Berger, 2008. "Does Money Growth Granger-Cause Inflation in the Euro Area? Evidence from Out-of-Sample Forecasts Using Bayesian VARs," IMF Working Papers 08/53, International Monetary Fund.
- Kulaksizoglu, Tamer & Kulaksizoglu, Sebnem, 2009. "The U.S. Excess Money Growth and Inflation Relation in the Long-Run: A Nonlinear Analysis," MPRA Paper 23780, University Library of Munich, Germany.
- Berger, Helge & Österholm, Pär, 2008.
"Does money matter for U.S. inflation? Evidence from Bayesian VARs,"
2008/9, Free University Berlin, School of Business & Economics.
- Helge Berger & Pär �sterholm, 2011. "Does Money matter for U.S. Inflation? Evidence from Bayesian VARs," CESifo Economic Studies, CESifo, vol. 57(3), pages 531-550, September.
- PÃ¤r Ã–sterholm & Helge Berger, 2008. "Does Money Matter for U.S. Inflation? Evidence from Bayesian VARs," IMF Working Papers 08/76, International Monetary Fund.
- Chauvet, Marcelle & Tierney, Heather L. R., 2007. "Real Time Changes in Monetary Policy," MPRA Paper 16199, University Library of Munich, Germany, revised Apr 2009.
- Qi Li & Jeffrey Scott Racine, 2006. "Nonparametric Econometrics: Theory and Practice," Economics Books, Princeton University Press, edition 1, volume 1, number 8355.
- Jane M. Binner & Peter Tino & Jonathan Tepper & Richard G. Anderson & Barry Jones & Graham Kendall, 2009.
"Does money matter in inflation forecasting?,"
2009-030, Federal Reserve Bank of St. Louis.
- Binner, J.M. & Tino, P. & Tepper, J. & Anderson, R. & Jones, B. & Kendall, G., 2010. "Does money matter in inflation forecasting?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(21), pages 4793-4808.
- Berger, Helge & Österholm, Pär, 2008. "Does money growth granger-cause inflation in the Euro Area? Evidence from output-of-sample forecasts using Bayesian VARs," Discussion Papers 2008/10, Free University Berlin, School of Business & Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.