U.S. Domestic Money, Inflation and Output

Yunus Aksoy and Tomasz Piskorski

Macroeconomics from University Library of Munich, Germany

Abstract: Recent empirical research found that the strong short-term relationship between monetary aggregates and US real output and inflation, as outlined in the classical study by M. Friedman and Schwartz, mostly disappeared since the early 1980s. In the light of the B. Friedman and Kuttner (1992) information value approach, we reevaluate the vanishing relationship between US monetary aggregates and these macroeconomic fundamentals by taking into account the international currency feature of the US dollar. In practice, by using official US data for foreign flows constructed by Porter and Judson (1996) we find that domestic money (currency component of M1 corrected for the foreign holdings of dollars) contains valuable information about future movements of US real output and inflation. Statistical evidence here provided thus suggests that the Friedman and Schwartz's stylized facts can be reestablished once the focus of analysis is back on the domestic monetary aggregates.

Keywords: Foreign holdings; US monetary aggregates; information value; Friedman-Schwartz's evidence (search for similar items in EconPapers)
JEL-codes: E3 E4 E5 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2004-01-26
New Economics Papers: this item is included in nep-ifn, nep-mac and nep-mon
Note: Type of Document - pdf; prepared on WinXP; pages: 49; figures: 11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0401/0401007.pdf (application/pdf)

Related works:
Journal Article: U.S. domestic money, inflation and output (2006)
Working Paper: U.S. Domestic Money, Inflation and Output (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0401007

Access Statistics for this paper

More papers in Macroeconomics from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).