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Inflation and Money Growth - Evidence from a Multi-Country Data-Set

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  • John C. Frain

    (Central Bank and Financial Services Regulatory Authority of Ireland and Trinity College Dublin)

Abstract

Using a multi-country data set strong correlation are found between average growth rates of monetary aggregates and average inflation. The correlation remains strong when countries with higher average inflation rates are removed from the sample. These results confirm the strong correlation found in the traditional literature but contradict those in De Grauwe and Polan (2001) who, in a recent analysis, find that the strong link vanishes when higher inflation countries are excluded. Further analysis confirms the unit response and bears out the value of monetary aggregates as an input to the making of monetary policy.

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File URL: http://www.esr.ie/Vol35%203/Vol%2035_3Frain.pdf
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Bibliographic Info

Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 35 (2004)
Issue (Month): 3 ()
Pages: 251-266

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Handle: RePEc:eso:journl:v:35:y:2004:i:3:p:251-266

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  1. Frain, John C., 2003. "Inflation and Money Growth: Evidence from a Multi-Country Data-Set," Research Technical Papers 7/RT/03, Central Bank of Ireland.
  2. De Grauwe, Paul & Polan, Magdalena, 2001. "Is Inflation Always and Everywhere a Monetary Phenomenon?," CEPR Discussion Papers 2841, C.E.P.R. Discussion Papers.
  3. Laurence H. Meyer, 2001. "Does money matter?," Review, Federal Reserve Bank of St. Louis, issue May, pages 1-16.
  4. Gerald P. Dwyer, Jr. & R.W. Hafer, 1999. "Are money growth and inflation still related?," Economic Review, Federal Reserve Bank of Atlanta, issue Q2, pages 32-43.
  5. James H. Stock & Mark W. Watson, 1991. "A simple estimator of cointegrating vectors in higher order integrated systems," Working Paper Series, Macroeconomic Issues 91-3, Federal Reserve Bank of Chicago.
  6. Paul De Grauwe & Magdalena Polan, 2001. "Is Inflation Always and Everywhere a Monetary Phenomenon?," International Economics Working Papers Series wpie009, Katholieke Universiteit Leuven, Centrum voor Economische Studiƫn, International Economics.
  7. James A. Dorn, 2003. "Introduction," Cato Journal, Cato Journal, Cato Institute, vol. 23(1), pages 1-9, Spring/Su.
  8. Nelson, Edward, 2003. "The future of monetary aggregates in monetary policy analysis," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 1029-1059, July.
  9. George T. McCandless, Jr. & Warren E. Weber, 1995. "Some monetary facts," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-11.
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Cited by:
  1. Frain, John C., 2003. "Inflation and Money Growth: Evidence from a Multi-Country Data-Set," Research Technical Papers 7/RT/03, Central Bank of Ireland.
  2. Dwyer, Gerald P. & Fisher, Mark, 2009. "Inflation and monetary regimes," Journal of International Money and Finance, Elsevier, vol. 28(7), pages 1221-1241, November.
  3. John Thornton, 2006. "The Intertemporal Relation Between Money And Prices In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 74(1), pages 59-64, 03.

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