Inflation and Monetary Regimes

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: Correlations of inflation with the growth rate of money increase when data are averaged over longer time periods. Correlations of inflation with the growth of money also are higher when high-inflation as well as low-inflation countries are included in the analysis. We show that serial correlation in the underlying inflation rate ties these two observations together and explains them. We present evidence that averaging increases the correlation of inflation and money growth more when the underlying inflation rate has higher serial correlation. Terms of use: Documents inJEL classification: E31, E5

Time Aggregation and the Relationship between Inflation and Money Growth

“…The vertical line at 0.15 separates the LMG group from the HMG group: 58 countries reside to the left of the boundary, and 41 countries to the right. Like Gerlach (), Frain (), and Dwyer and Fisher (), we find that rises and the confidence bounds shrink as countries with higher money growth are added to the sample. Further, we see that remains well below 1.0 at money growth rates less than about 30%.…”

“…Teles and Uhlig () conjecture that widespread inflation targeting, whether tacit or not and beginning as early as 1990, was responsible for the breakdown in the money growth–inflation relationship among OECD countries after 1990. Dwyer and Fisher () report that the correlation between money growth and inflation is close to unity for high‐inflation countries, but that the correlation between money growth and inflation declines at lower rates of money growth, a finding that echoes Gerlach (). They also claim that when countries target inflation and the target is serially correlated, the correlation between money growth and inflation rises with time aggregation.…”