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Does Money matter for U.S. Inflation? Evidence from Bayesian VARs

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  • Helge Berger
  • Pär �sterholm

Abstract

We use Bayesian estimation techniques to assess whether money growth Granger-causes inflation in the USA. We investigate the issue of Granger-causality out-of-sample and find 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 close to negligible in recent subperiods. (JEL codes: E47, E52, E58) Copyright The Author 2011. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please email: journals.permissions@oup.com, Oxford University Press.

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Bibliographic Info

Article provided by CESifo in its journal CESifo Economic Studies.

Volume (Year): 57 (2011)
Issue (Month): 3 (September)
Pages: 531-550

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Handle: RePEc:oup:cesifo:v:57:y:2011:i:3:p:531-550

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Cited by:
  1. Berger, Helge & Stavrev, Emil, 2008. "The information content of money in forecasting Euro area inflation," Discussion Papers 2008/15, Free University Berlin, School of Business & Economics.

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