On the relationship between money and inflation in the United States: additional evidence

Benjamin Cheng

Applied Economics Letters, 1996, vol. 3, issue 8, 549-552

Abstract: The causality between money and inflation is re-examined by applying Hsiao's version of the Granger causality method to US data for the period 1959-94. The Phillips-Perron unit roots tests are performed and the series of M1 and M2 become stationary after first differencing, while the series of CPI, PPI, GDP deflator, and M3 become stationary after second differencing. It is revealed that money (measured in M1 or M2) does not cause inflation, yet if the M3 measure of money is used, then it is found that money causes inflation.

Date: 1996
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DOI: 10.1080/135048596356221

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