A Note of Caution on the Relation between Money Growth and Inflation

Helge Berger (), Sune Karlsson () and Pär Österholm
Additional contact information
Helge Berger: International Monetary Fund, Postal: International Monetary Fund, 700 19th Street NW, Washington, DC 20431, USA, https://www.imf.org/en/Research/Researcher-CV/Author/Berger-Helge?AuthID=202

No 2023:9, Working Papers from Örebro University, School of Business

Abstract: We assess the bivariate relation between money growth and inflation in the euro area and the United States using hybrid time-varying parameter Bayesian VAR models. Model selection based on marginal likelihoods suggests that the relation is statistically unstable across time in both regions. The effect that shocks to money growth has on inflation weakened notably after the 1980s before making a comeback after 2020. This instability implies that caution should be exercised when relating monetary aggregates to inflation.

Keywords: Bayesian VAR; Time-varying parameters; Stochastic volatility; Model selection (search for similar items in EconPapers)
JEL-codes: E31 E37 E47 E51 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2023-04-28
New Economics Papers: this item is included in nep-his and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: A note of caution on the relation between money growth and inflation (2023)
Working Paper: A Note of Caution on the Relation Between Money Growth and Inflation (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:oruesi:2023_009

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