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A Modified P*-Model of Inflation Based on M1

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  • Atta-Mensah, J

Abstract

This paper examines the performance of M1 in an indicator model of inflation over time horizons as long as 16 quarters into the future. The central conclusion of the paper is that, in addtion to the output gap, the cumulative growth of M1 and the deviations of M1 from its long-run path provide "distant-early-warning" information about the future path of inflation.

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Bibliographic Info

Paper provided by Bank of Canada in its series Working Papers with number 96-15.

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Length: 24 pages
Date of creation: 1996
Date of revision:
Handle: RePEc:bca:bocawp:96-15

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Keywords: ECONOMIC MODELS; INFLATION;

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References

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  1. Jeffrey J. Hallman & Richard D. Porter & David H. Small, 1989. "M2 per unit of potential GNP as an anchor for the price level," Staff Studies 157, Board of Governors of the Federal Reserve System (U.S.).
  2. Joseph Atta-Mensah, 1996. "The Empirical Performance of Alternative Monetary and Liquidity Aggregates," Macroeconomics 9601001, EconWPA.
  3. Hallman, Jeffrey J & Porter, Richard D & Small, David H, 1991. "Is the Price Level Tied to the M2 Monetary Aggregate in the Long Run?," American Economic Review, American Economic Association, vol. 81(4), pages 841-58, September.
  4. R.A. Pecchenino & Robert H. Rasche, 1990. "P* Type Models: Evaluation and Forecasts," NBER Working Papers 3406, National Bureau of Economic Research, Inc.
  5. John A. Tatom, 1990. "The P-star approach to the link between money and prices," Working Papers 1990-008, Federal Reserve Bank of St. Louis.
  6. David E. Laidler, 1988. "Taking Money Seriously," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 687-713, November.
  7. Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-53, October.
  8. Zsolt Becsi & John V. Duca, 1994. "Adding bond funds to M2 in the P-star model of inflation," Working Papers 9401, Federal Reserve Bank of Dallas.
  9. Scott Hendry, 1995. "Long-Run Demand for M1," Macroeconomics 9511001, EconWPA.
  10. Milbourne, Ross D, 1987. "Re-examining the Buffer-Stock Model of Money," Economic Journal, Royal Economic Society, vol. 97(388a), pages 130-42, Supplemen.
  11. Armour, J. & Atta-Mensah, J. & Engert, W. & Hendry, S., 1996. "A Distant-Early-Warning Model of Inflation Based on M1 Disequilibria," Working Papers 96-5, Bank of Canada.
  12. Chong, Yock Y & Hendry, David F, 1986. "Econometric Evaluation of Linear Macro-Economic Models," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 671-90, August.
  13. Liam P. Ebrill & Steven M. Fries, 1991. "Broad Money Growth and Inflation in the United States," IMF Staff Papers, Palgrave Macmillan, vol. 38(4), pages 736-750, December.
  14. Kenneth N. Kuttner, 1990. "Inflation and the growth rate of money," Economic Perspectives, Federal Reserve Bank of Chicago, issue Jan, pages 2-11.
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Citations

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Cited by:
  1. Ahmad Tashkini, 2006. "The P-star Model in Iran (1960-2005)," Iranian Economic Review, Economics faculty of Tehran university, vol. 11(1), pages 115-122, winter.
  2. Martha Misas & Enrique López & Luis Fernando Melo, . "La Inflación desde una Perspectiva Monetaria: Un Modelo P* para Colombia," Borradores de Economia 133, Banco de la Republica de Colombia.
  3. Tödter, Karl-Heinz, 2002. "Monetary indicators and policy rules in the P-star model," Discussion Paper Series 1: Economic Studies 2002,18, Deutsche Bundesbank, Research Centre.
  4. Hogan, Seamus & Marianne Johnson & Thérèse Laflèche, 2001. "Core Inflation," Technical Reports 89, Bank of Canada.

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