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Long Run Inflation Indicators – Why the ECB got it Right

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Author Info
Andersson, Fredrik N. G. () (Department of Economics, Lund University)
Abstract

This paper studies the issue of whether money contains useful information about future inflation in a panel of nine developed countries. A low frequency estimate of excess money growth is compared to an estimate of the inflation trend following the discussion in Woodford (2007). The empirical analysis shows that money contains more information about future CPI-inflation than an estimate of the inflation trend, and that the output gap has some influence over the medium run movements of inflation, but the effect varies over time. The result is the same for small countries as it is for large countries. Money thus contains information about future headline inflation that the inflation trend does not.

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Paper provided by Lund University, Department of Economics in its series Working Papers with number 2008:17.

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Length: 30 pages
Date of creation: 02 Dec 2008
Date of revision:
Handle: RePEc:hhs:lunewp:2008_017

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Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/
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Related research
Keywords: Inflation; Money; Inflation Indicators; Wavelet Analysis;

Find related papers by JEL classification:
C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Other
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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