The relation between U.S. money growth and inflation: evidence from a band-pass filter

Gary Shelley () and Frederick Wallace ()
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Gary Shelley: Dept. of Economics & Finance; East Tennessee State University

Economics Bulletin, 2005, vol. 5, issue 8, pages 1-13

Abstract: Christiano and Fitzgerald (2003) found a significant, positive correlation between M2 money growth and CPI inflation in all examined frequency bands for the U.S. prior to 1961. However, for post-1960 data, they found a positive correlation only in the frequency band corresponding to cycles of 20-40 years. Using their filter, we verify this result and extend the pre-1961 sample to include the monetary base and inflation calculated from the GDP deflator. In addition, we extend their post-1960 analysis to include growth in the monetary base, M1, and M3. A strongly positive correlation between post-1960 money growth and inflation exits only for the broad money aggregates and within the 20-40 year frequency band.

Keywords: band-pass filter; inflation; money growth (search for similar items in EconPapers)
JEL-codes: E3 E4 (search for similar items in EconPapers)
Date: 2005 Written
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