IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

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

  • João Valle e Azevedo
  • Ana Pereira

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.bportugal.pt/en-US/BdP%20Publications%20Research/wp201024.pdf
Download Restriction: no

Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w201024.

as
in new window

Length:
Date of creation: 2010
Date of revision:
Handle: RePEc:ptu:wpaper:w201024
Contact details of provider: Postal: R. do Ouro, 27, 1100 LISBOA
Phone: 21 321 32 00
Fax: 21 346 48 43
Web page: http://www.bportugal.pt
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Randall Wright & Guido Menzio & Aleksander Berentsen, 2008. "Inflation and Unemployment in the Long Run," 2008 Meeting Papers 34, Society for Economic Dynamics.
  2. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  3. Bennett T. McCallum, 2001. "Monetary policy analysis in models without money," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 145-164.
  4. Pedro Teles & Harald Uhlig, 2010. "Is Quantity Theory Still Alive?," NBER Working Papers 16393, National Bureau of Economic Research, Inc.
  5. Ang, Andrew & Bekaert, Geert & Wei, Min, 2007. "Do macro variables, asset markets, or surveys forecast inflation better?," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1163-1212, May.
  6. Gabriel Perez-Quiros & Margaret M. McConnell, 2000. "Output Fluctuations in the United States: What Has Changed since the Early 1980's?," American Economic Review, American Economic Association, vol. 90(5), pages 1464-1476, December.
  7. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-72, June.
  8. Javier Andrés & J. David López-Salido & Edward Nelson, 2007. "Money and the natural rate of interest: structural estimates for the United States and the Euro area," Working Papers 2007-005, Federal Reserve Bank of St. Louis.
  9. Robert J. Gordon, 1981. "Price Inertia and Policy Ineffectiveness in the United States, 1890-1980," NBER Working Papers 0744, National Bureau of Economic Research, Inc.
  10. Edward Nelson, 2008. "Why money growth determines inflation in the long run: answering the Woodford critique," Working Papers 2008-013, Federal Reserve Bank of St. Louis.
  11. Arturo Estrella & Frederic S. Mishkin, 1996. "Is There a Role for Monetary Aggregates in the Conduct of Monetary Policy?," NBER Working Papers 5845, National Bureau of Economic Research, Inc.
  12. James H. Stock & Mark W. Watson, 1998. "Business Cycle Fluctuations in U.S. Macroeconomic Time Series," NBER Working Papers 6528, National Bureau of Economic Research, Inc.
  13. James H. Stock & Mark W. Watson, 1999. "Forecasting Inflation," NBER Working Papers 7023, National Bureau of Economic Research, Inc.
  14. Domenico Giannone & Michèle Lenza & Lucrezia Reichlin, . "Explaining the great moderation: it is not the shocks," ULB Institutional Repository 2013/6413, ULB -- Universite Libre de Bruxelles.
  15. Lucas, Robert E, Jr, 1980. "Two Illustrations of the Quantity Theory of Money," American Economic Review, American Economic Association, vol. 70(5), pages 1005-14, December.
  16. Reynard, Samuel, 2007. "Maintaining low inflation: Money, interest rates, and policy stance," Journal of Monetary Economics, Elsevier, vol. 54(5), pages 1441-1471, July.
  17. Albert Jaeger, 2003. "The ECB'S Money Pillar; An Assessment," IMF Working Papers 03/82, International Monetary Fund.
  18. Ireland, Peter N, 2004. "Money's Role in the Monetary Business Cycle," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 969-83, December.
  19. Bennett T. McCallum, 2000. "Theoretical Analysis Regarding a Zero Lower Bound on Nominal Interest Rates," NBER Working Papers 7677, National Bureau of Economic Research, Inc.
  20. James H. Stock & Mark W. Watson, 2003. "Has the Business Cycle Changed and Why?," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 159-230 National Bureau of Economic Research, Inc.
  21. Milton Friedman, 1961. "The Lag in Effect of Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 69, pages 447.
  22. Pierce, David A., 1980. "Data revisions with moving average seasonal adjustment procedures," Journal of Econometrics, Elsevier, vol. 14(1), pages 95-114, September.
  23. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
  24. James H. Stock & Mark W. Watson, 2003. "Has the business cycle changed?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 9-56.
  25. Andrew Atkeson & Lee E. Ohanian., 2001. "Are Phillips curves useful for forecasting inflation?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-11.
  26. Michael Woodford, 2007. "How Important is Money in the Conduct of Monetary Policy?," Levine's Working Paper Archive 122247000000001419, David K. Levine.
  27. Galí, Jordi, 2002. "New Perspectives on Monetary Policy, Inflation and the Business Cycle," CEPR Discussion Papers 3210, C.E.P.R. Discussion Papers.
  28. James H. Stock & Mark W. Watson, 2007. "Why Has U.S. Inflation Become Harder to Forecast?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 3-33, 02.
  29. Nelson, Edward, 2003. "The future of monetary aggregates in monetary policy analysis," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 1029-1059, July.
  30. Katrin Assenmacher-Wesche & Stefan Gerlach, 2007. "Money at Low Frequencies," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 534-542, 04-05.
  31. Goodfriend, Marvin & King, Robert G., 2005. "The incredible Volcker disinflation," Journal of Monetary Economics, Elsevier, vol. 52(5), pages 981-1015, July.
  32. Gerlach, Stefan & Svensson, Lars E. O., 2003. "Money and inflation in the euro area: A case for monetary indicators?," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1649-1672, November.
  33. Robert E. Lucas, Jr., 2000. "Inflation and Welfare," Econometrica, Econometric Society, vol. 68(2), pages 247-274, March.
  34. Thoma, Mark A, 1994. "The Effects of Money Growth on Inflation and Interest Rates across Spectral Frequency Bands," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(2), pages 218-31, May.
  35. Woodford, Michael, 2007. "Does a 'Two-Pillar Phillips Curve' Justify a Two-Pillar Monetary Policy Strategy?," CEPR Discussion Papers 6447, C.E.P.R. Discussion Papers.
  36. James H. Stock & Mark W. Watson, 2008. "Phillips Curve Inflation Forecasts," NBER Working Papers 14322, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ptu:wpaper:w201024. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (DEE-NTDD)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.