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Money growth and consumer price inflation in the euro area: An update

Author

Listed:
  • Mandler, Martin
  • Scharnagl, Michael

Abstract

We update the wavelet-based analysis of the relationship between money growth and inflation in the euro area in Mandler and Scharnagl (2014). The relationship between headline M3 growth and inflation at low frequencies has weakened over the 1990s. However, we find evidence of stable comovement between money growth adjusted by real GDP growth and consumer price inflation for cycles of 24 years and longer duration. The long-run fluctuations of adjusted money growth and inflation move roughly about 1:1 and are contemporaneous, i.e. there is no lead of money growth. Our analysis of cycles in both variables of 24 years and longer provides information on the relationship between the variables from the late 1980s to the early 2000s.

Suggested Citation

  • Mandler, Martin & Scharnagl, Michael, 2023. "Money growth and consumer price inflation in the euro area: An update," Technical Papers 01/2023, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubtps:283345
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    References listed on IDEAS

    as
    1. Mandler, Martin & Scharnagl, Michael, 2014. "Money growth and consumer price inflation in the euro area: A wavelet analysis," Discussion Papers 33/2014, Deutsche Bundesbank.
    2. Benati, Luca, 2009. "Long run evidence on money growth and inflation," Working Paper Series 1027, European Central Bank.
    3. Luís Aguiar-Conraria & Maria Joana Soares, 2014. "The Continuous Wavelet Transform: Moving Beyond Uni- And Bivariate Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 28(2), pages 344-375, April.
    4. 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.
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    Cited by:

    1. Martin Mandler & Michael Scharnagl, 2025. "Money Growth and Inflation—How to Account for the Differences in Empirical Results," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 44(3), pages 1009-1025, April.

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    Keywords

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    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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