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Forecasting Inflation (and the Business Cycle?) with Monetary Aggregates

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  • João Valle e Azevedo

Abstract

We show how monetary aggregates can be usefully incorporated in forecasts of inflation. This requires fully disregarding the high frequency fluctuations blurring the money/inflation relation, i.e., the projection of inflation onto monetary aggregates must be restricted to the low frequencies. Using the same tools, we show that money growth has (little) predictive power over output at business cycle frequencies.

Suggested Citation

  • João Valle e Azevedo, 2010. "Forecasting Inflation (and the Business Cycle?) with Monetary Aggregates," Working Papers w201024, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:wpaper:w201024
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    References listed on IDEAS

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    Cited by:

    1. Ana Sequeira, 2013. "Predicting aggregate returns using valuation ratios out-of-sample," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.

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