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On the relationship between real and nominal variables in developed countries

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  • Petr Duczynski

Abstract

The paper examines money-output and price-output relations in developed countries between 1980 and 2005. We observe that declines in the nominal monetary base are connected with a moderately below-average behaviour of the real output. The same result applies for small positive growth rates of nominal M1 and M2. High growth rates of money are associated with the above-average product growth. We have some evidence that broader monetary aggregates are more closely associated with the real product than narrower monetary aggregates. As opposed to the money-output connection, we show that low inflation was accompanied by high product growth.

Suggested Citation

  • Petr Duczynski, 2009. "On the relationship between real and nominal variables in developed countries," Prague Economic Papers, Prague University of Economics and Business, vol. 2009(1), pages 48-60.
    • Handle: RePEc:prg:jnlpep:v:2009:y:2009:i:1:id:341:p:48-60
    DOI: 10.18267/j.pep.341
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    References listed on IDEAS

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    1. Paul De Grauwe & Magdalena Polan, 2005. "Is Inflation Always and Everywhere a Monetary Phenomenon?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(2), pages 239-259, June.
    2. Geweke, John F, 1986. "The Superneutrality of Money in the United States: An Interpretation of the Evidence," Econometrica, Econometric Society, vol. 54(1), pages 1-21, January.
    3. Boschen, John F. & Mills, Leonard O., 1995. "Tests of long-run neutrality using permanent monetary and real shocks," Journal of Monetary Economics, Elsevier, vol. 35(1), pages 25-44, February.
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    More about this item

    Keywords

    consumer prices; real output; developed countries; nominal monetary aggregates;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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