Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/28075
Authors: 
Berger, Helge
Österholm, Pär
Year of Publication: 
2008
Series/Report no.: 
Diskussionsbeiträge des Fachbereichs Wirtschaftswissenschaft der Freien Universität Berlin 2008/9
Abstract: 
We use Bayesian estimation techniques to investigate whether money growth Granger-causes inflation in the United States. We test for Granger-causality out-of-sample and find, perhaps surprisingly given recent theoretical arguments, that including money growth in simple VAR models of inflation does systematically improve out-of-sample forecasting accuracy. This holds for a long forecasting sample 1960-2005, as well for more recent subperiods, including the Volcker and Greenspan eras. However, the contribution of money to inflation forecasting accuracy is quantitatively limited and tends to be smaller in recent subperiods, in particular in models that also include information on real GDP growth and interest rates.
Subjects: 
Out-of-sample forecasting
granger causality
monetary aggregates
monetary policy
Volcker
Greenspan
JEL: 
E47
E52
E58
ISBN: 
3938369809
Document Type: 
Working Paper

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