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Does global liquidity help to forecast US inflation?

  • D'Agostino, A
  • Surico, P

We construct a measure of global liquidity using the growth rates of broad money for the G7 economies. Global liquidity produces forecasts of US inflation that are significantly more accurate than the forecasts based on US money growth, Phillips curve, autoregressive and moving average models. The marginal predictive power of global liquidity is strong at three years horizons. Results are robust to alternative measures of inflation.

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File URL: http://mpra.ub.uni-muenchen.de/6283/1/MPRA_paper_6283.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6283.

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Date of creation: Nov 2007
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Handle: RePEc:pra:mprapa:6283
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  8. Giannone, Domenico & Reichlin, Lucrezia & Sala, Luca, 2005. "Monetary Policy in Real Time," CEPR Discussion Papers 4981, C.E.P.R. Discussion Papers.
    • Domenico Giannone & Lucrezia Reichlin & Luca Sala, 2005. "Monetary Policy in Real Time," NBER Chapters, in: NBER Macroeconomics Annual 2004, Volume 19, pages 161-224 National Bureau of Economic Research, Inc.
  9. Nicoletti-Altimari, Sergio, 2001. "Does money lead inflation in the euro area?," Working Paper Series 0063, European Central Bank.
  10. Sergio Rossi, 2001. "Money and Inflation," Books, Edward Elgar, number 2571, December.
  11. Benati, Luca, 2009. "Long run evidence on money growth and inflation," Working Paper Series 1027, European Central Bank.
  12. Milton Friedman & Anna J. Schwartz, 1982. "Monetary Trends in the United States and United Kingdom: Their Relation to Income, Prices, and Interest Rates, 1867–1975," NBER Books, National Bureau of Economic Research, Inc, number frie82-2, 07.
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