Recently, the Bank of Japan outlined a two perspectives approach to the conduct of monetary policy that focuses on risks to price stability over different time horizons. Interpreting this as pertaining to different frequency bands, we use band spectrum regression to study the determination of inflation in Japan. We find that inflation is related to money growth and real output growth at low frequencies and the output gap at higher frequencies. Moreover, this relationship reflects Granger causality from money growth and the output gap to inflation in the relevant frequency bands.
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Paper provided by Swiss National Bank in its series Working Papers with number
2007-13.
Length: 35 pages Date of creation: 30 Apr 2007 Date of revision: Handle: RePEc:ris:snbwpa:2007_013
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Find related papers by JEL classification: C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
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Engle, Robert F, 1974.
"Band Spectrum Regression,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(1), pages 1-11, February.
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