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The relation between U.S. money growth and inflation: evidence from a band-pass filter

  • Gary Shelley

    ()

    (Dept. of Economics & Finance East Tennessee State University)

  • Frederick Wallace

    ()

    (Dept. of Management & Marketing Prairie View A&M University)

Christiano and Fitzgerald (2003) found a significant, positive correlation between M2 money growth and CPI inflation in all examined frequency bands for the U.S. prior to 1961. However, for post-1960 data, they found a positive correlation only in the frequency band corresponding to cycles of 20-40 years. Using their filter, we verify this result and extend the pre-1961 sample to include the monetary base and inflation calculated from the GDP deflator. In addition, we extend their post-1960 analysis to include growth in the monetary base, M1, and M3. A strongly positive correlation between post-1960 money growth and inflation exits only for the broad money aggregates and within the 20-40 year frequency band.

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File URL: http://www.accessecon.com/pubs/EB/2005/Volume5/EB-05E30001A.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 5 (2005)
Issue (Month): 8 ()
Pages: 1-13

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Handle: RePEc:ebl:ecbull:eb-05e30001
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  1. Marianne Baxter & Robert G. King, 1995. "Measuring Business Cycles Approximate Band-Pass Filters for Economic Time Series," NBER Working Papers 5022, National Bureau of Economic Research, Inc.
  2. Coe, Patrick J. & Nason, James M., 2003. "The long-horizon regression approach to monetary neutrality: how should the evidence be interpreted?," Economics Letters, Elsevier, vol. 78(3), pages 351-356, March.
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