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On the relationship between money and inflation in the United States: additional evidence

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  • Benjamin Cheng

Abstract

The causality between money and inflation is re-examined by applying Hsiao's version of the Granger causality method to US data for the period 1959-94. The Phillips-Perron unit roots tests are performed and the series of M1 and M2 become stationary after first differencing, while the series of CPI, PPI, GDP deflator, and M3 become stationary after second differencing. It is revealed that money (measured in M1 or M2) does not cause inflation, yet if the M3 measure of money is used, then it is found that money causes inflation.

Suggested Citation

  • Benjamin Cheng, 1996. "On the relationship between money and inflation in the United States: additional evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 3(8), pages 549-552.
    • Handle: RePEc:taf:apeclt:v:3:y:1996:i:8:p:549-552
    DOI: 10.1080/135048596356221
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    Cited by:

    1. Benjamin Cheng, 1997. "The causality between dollar and pound: An application of cointegration and error-correction modeling," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 21(2), pages 19-26, June.
    2. Cheng, Benjamin S., 1999. "Beyond the purchasing power parity: testing for cointegration and causality between exchange rates, prices, and interest rates," Journal of International Money and Finance, Elsevier, vol. 18(6), pages 911-924, December.

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