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Money at Low Frequencies

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  • Assenmacher-Wesche, Katrin
  • Gerlach, Stefan

Abstract

Many central banks have abandoned monetary targeting because the link between money growth and inflation seemed to disappear in the 1980s. Using spectral regression techniques, we show that for the euro area, Japan, the UK and the US there is a unit relationship between money growth and inflation at low frequencies when the impact of interest rate changes on money demand is accounted for. We estimate Phillips-curve equations in which the low-frequency information from money growth is combined with high-frequency information from the output gap to explain movements in inflation.

Suggested Citation

  • Assenmacher-Wesche, Katrin & Gerlach, Stefan, 2006. "Money at Low Frequencies," CEPR Discussion Papers 5868, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:5868
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    1. Katrin Assenmacher-Wesche & Stefan Gerlach, 2007. "Understanding the Link between Money Growth and Inflation in the Euro Area," Palgrave Macmillan Books, in: David Cobham (ed.), The Travails of the Eurozone, chapter 2, pages 10-41, Palgrave Macmillan.
    2. Assenmacher-Wesche, Katrin & Gerlach, Stefan, 2008. "Money growth, output gaps and inflation at low and high frequency: Spectral estimates for Switzerland," Journal of Economic Dynamics and Control, Elsevier, vol. 32(2), pages 411-435, February.
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    More about this item

    Keywords

    frequency domain; Phillips curve; Quantity theory; spectral regression;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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