The relationship of simple sum and Divisia monetary aggregates with real GDP and inflation: a wavelet analysis for the US

Michael Scharnagl and Martin Mandler

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: We apply wavelet analysis to compare the relationship between simple sum and Divisa monetary aggregates with real GDP and CPI infl ation for the U.S. using data from 1967 to 2013. Wavelet analysis allows to account for variations in the relationships both across the frequency spectrum and across time. While we find evidence for a weaker comovement of Divisia compared to simple sum monetary aggregates with real GDP the relationship between money growth and infl ation is estimated to be much tighter between Divisia monetary aggregates and CPI infl ation than for simple sum aggregates, in particular at lower frequencies. Furthermore, for the Divisia indices for broader monetary aggregates (M2, M2M, MZM) we estimate a stable lead before CPI in flation of about four to five years.

JEL-codes: C30 E31 E40 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc15:112879

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