Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152904
Authors: 
Bruggeman, Annick
Camba-Méndez, Gonzalo
Fischer, Björn
Sousa, João
Year of Publication: 
2005
Series/Report no.: 
ECB Working Paper 470
Abstract: 
The quantity theory of money predicts a positive relationship between monetary growth and inflation over long-run horizons. However, in the short-run, transitory shocks to either money or inflation can obscure the inflationary signal stemming from money. The spectral analysis of time series provides filtering tools for removing fluctuations associated with certain frequency movements. However, use of these techniques in isolation is often criticised as being an oversimplistic statistical exercise potentially void of economic content. The objective of this paper is to develop ‘structural’ filtering techniques that rely on the use of spectral analysis in combination with a structural economic model with well identified shocks. A ‘money augmented’ Phillips curve that links inflation to money tightness and demand shocks of medium to long-term persistence is presented. It is shown that medium to long-term movements in inflation are mostly associated with the estimated monetary indicators.
Subjects: 
Inflation and Money
JEL: 
E31
E50
C32
Document Type: 
Working Paper

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