Money and Inflation
AbstractWe turn our attention to the role of money for determining nominal magnitudes. Using US data, we find that the aggregate “nominal output plus and stock market capitalisation” is closely related to the money stock, lending support to one of Milton Friedman’s key monetarist propositions. This finding should be particularly important for ECB monetary policy: an inflation-free euro plays a crucial role for European economic and political integration. We conclude that monetary policy must keep a very close eye on money supply if it wants to prevent consumer and asset price inflation.
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Bibliographic InfoPaper provided by Department of Economics, University of Hohenheim, Germany in its series Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim with number 284/2007.
Date of creation: 2007
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Postal: D-70593 Stuttgart
Web page: http://www.uni-hohenheim.de/institution/institut-fuer-economics-11
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- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-24 (All new papers)
- NEP-CBA-2007-03-24 (Central Banking)
- NEP-MAC-2007-03-24 (Macroeconomics)
- NEP-MON-2007-03-24 (Monetary Economics)
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