Does Money Matter for U.S. Inflation? Evidence from Bayesian VARs
IMF Working Papers, March 1, 2008
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- Does Money Matter for U.S. Inflation? Evidence from Bayesian VARs
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Bibliographic details
- Authors: Pär Österholm, Helge Berger
- Published: March 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451869385.001
Summary and main finding
- Study uses Bayesian estimation techniques to investigate whether money growth Granger-causes inflation in the United States.
- Out-of-sample Granger-causality tests show that including money growth in simple VAR models of inflation does systematically improve out-of-sample forecasting accuracy.
- Improvement holds for a long forecasting sample 1960-2005, and for more recent subperiods, including the Volcker and Greenspan eras.
- The contribution of money to inflation forecasting accuracy is quantitatively limited and tends to be smaller in recent subperiods, particularly in models that also include information on real GDP growth and interest rates.
Methods
- Econometric approach: Bayesian estimation of VAR models.
- Evaluation: Out-of-sample Granger-causality tests and forecasting accuracy comparisons.
Quantitative scope and sample
- Forecasting sample: 1960-2005.
- Pages: 17.
- Publication date: March 1, 2008.
- Volume: 2008.
- Issue: 076.
- Series: Working Paper No. 2008/076.
- DOI: https://doi.org/10.5089/9781451869385.001.
- Stock No: WPIEA2008076.
- ISBN: 9781451869385.
- ISSN: 1018-5941.
Authors and topical focus
- By Pär Österholm, Helge Berger.
- Subjects: Demand for money, Economic forecasting, Inflation, Monetary aggregates, Monetary base.
- Keywords: interest rate, money, money growth, WP.
This content unit summarizes the IMF Working Paper "Does Money Matter for U.S. Inflation? Evidence from Bayesian VARs" (Working Paper No. 2008/076) by Pär Österholm and Helge Berger.