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Forecasting Inflation (and the Business Cycle?) with Monetary Aggregates

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  • João Valle e Azevedo
  • Ana Pereira

Abstract

We show how monetary aggregates can be usefully incorporated in forecasts of inflation. This requires fully disregarding the high-frequency fluctuations blurring the money/inflation relation, i.e., the projection of inflation onto monetary aggregates must be restricted to the low frequencies. Using the same tools, we show that money growth has (little) predictive power over output at business cycle frequencies.

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File URL: http://www.bportugal.pt/en-US/BdP%20Publications%20Research/wp201024.pdf
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Bibliographic Info

Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w201024.

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Date of creation: 2010
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Handle: RePEc:ptu:wpaper:w201024

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  1. Assenmacher-Wesche, Katrin & Gerlach, Stefan, 2006. "Money at Low Frequencies," CEPR Discussion Papers 5868, C.E.P.R. Discussion Papers.
  2. Assenmacher-Wesche, Katrin & Gerlach, Stefan, 2006. "Interpreting Euro Area Inflation at High and Low Frequencies," CEPR Discussion Papers 5632, C.E.P.R. Discussion Papers.
  3. Katrin Assenmacher-Wesche & Stefan Gerlach, 2006. "Money Growth, Output Gaps and Inflation at Low and High Frequency: Spectral Estimates for Switzerland," Working Papers 2006-05, Swiss National Bank.
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Cited by:
  1. Ana Sequeira, 2013. "Predicting aggregate returns using valuation ratios out-of-sample," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.

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