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Does Money Matter for U.S. Inflation? Evidence from Bayesian VARs, Pär Österholm, Helge Berger

Contributor
Abstract
We use Bayesian estimation techniques to investigate whether money growth Granger-causes inflation in the United States. We test for Granger-causality out-of-sample and find, perhaps surprisingly given recent theoretical arguments, that including money growth in simple VAR models of inflation does systematically improve out-of-sample forecasting accuracy. This holds for a long forecasting sample 1960-2005, as well for more recent subperiods, including the Volcker and Greenspan eras. However, the contribution of money to inflation forecasting accuracy is quantitatively limited and tends to be smaller in recent subperiods, in particular in models that also include information on real GDP growth and interest rates
Table Of Contents
Contents; I. Introduction; II. Other Related Literature; III. Methodology and Data; IV. Money and Inflation Since 1960; Figures; 1. Data; 2. Reduction in RMSE from adding money growth at different forecasting horizons, 1960- 2005; V. The Declining Role of Money During the Volcker and Greenspan Period; 3. Reduction in RMSE from adding money growth at different forecasting horizons, 1987/89/93-2005; VI. Horserace; VII. Conclusion; 4. RMSE levels at different forecasting horizons, 1970/87/89/93-2005; Appendix
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (19 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9786613831057

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