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Longer-term effects of monetary growth on real and nominal variables, major industrial countries, 1880-2001

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  • Dewald, William G.
  • Haug, Alfred A.

Abstract

We study how fluctuations in money growth correlate with fluctuations in real and nominal output growth and inflation. We pick cycles from each time series that last 2 to 8 (business cycles) and 8 to 40 (longer-term cycles) years, using band-pass filters. We employ a data set from 1880 to 2001 for eleven countries, without gaps. Fluctuations in money growth do not play a systematic and important role at the business cycle frequency. However, money growth leads or contemporaneously affects nominal output growth and inflation in the longer run. This result holds despite differences in policies and institutions across countries. JEL Classification: E3

Suggested Citation

  • Dewald, William G. & Haug, Alfred A., 2004. "Longer-term effects of monetary growth on real and nominal variables, major industrial countries, 1880-2001," Working Paper Series 382, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2004382
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    Cited by:

    1. Michael Woodford, 2008. "How Important Is Money in the Conduct of Monetary Policy?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(8), pages 1561-1598, December.
    2. Piyapas Tharavanij, 2007. "Capital Market, Frequency Of Recession, And Fraction Of Time The Economy In Recession," Monash Economics Working Papers 34-07, Monash University, Department of Economics.
    3. Carstensen, Kai, 2007. "Is core money growth a good and stable inflation predictor in the euro area?," Kiel Working Papers 1318, Kiel Institute for the World Economy (IfW Kiel).
    4. Kim, Kijin & Ardaniel, Zemma & Kikkawa, Aiko & Endriga, Benjamin, 2022. "Bilateral Remittance Inflows to Asia and the Pacific: Countercyclicality and Motivations to Remit," ADBI Working Papers 1315, Asian Development Bank Institute.
    5. Morana, Claudio, 2006. "A small scale macroeconometric model for the Euro-12 area," Economic Modelling, Elsevier, vol. 23(3), pages 391-426, May.
    6. Assenmacher-Wesche, Katrin & Gerlach, Stefan, 2008. "Money growth, output gaps and inflation at low and high frequency: Spectral estimates for Switzerland," Journal of Economic Dynamics and Control, Elsevier, vol. 32(2), pages 411-435, February.
    7. Assenmacher-Wesche, Katrin & Gerlach, Stefan, 2008. "Interpreting euro area inflation at high and low frequencies," European Economic Review, Elsevier, vol. 52(6), pages 964-986, August.
    8. Tharavanij, Piyapas, 2007. "Capital Market and Business Cycle Volatility," MPRA Paper 4952, University Library of Munich, Germany.
    9. Alfred A. Haug & William G. Dewald, 2012. "Money, Output, And Inflation In The Longer Term: Major Industrial Countries, 1880–2001," Economic Inquiry, Western Economic Association International, vol. 50(3), pages 773-787, July.
    10. Beck, Günter W. & Wieland, Volker, 2006. "Money in monetary policy design under uncertainty: The two-pillar Phillips curve versus ECB-style cross-checking," CFS Working Paper Series 2007/17, Center for Financial Studies (CFS).
    11. repec:zbw:bofrdp:2019_001 is not listed on IDEAS
    12. Mandler, Martin & Scharnagl, Michael, 2014. "Money growth and consumer price inflation in the euro area: A wavelet analysis," Discussion Papers 33/2014, Deutsche Bundesbank.
    13. Jiang, Chun & Chang, Tsangyao & Li, Xiao-Lin, 2015. "Money growth and inflation in China: New evidence from a wavelet analysis," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 249-261.
    14. Maciej Ryczkowski, 2016. "Modern central banking from monetary perspective," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 15(4), pages 547-556, December.
    15. Gilles Dufrénot & Roselyne Joyeux & Anne Péguin-Feissolle, 2006. "Which Predictor is the Best to Predict Inflation in Europe: the Real Money-gap or a Nominal Money Based Indicator?," Research Papers 0606, Macquarie University, Department of Economics.
    16. Tae-Hwan Kima & Paul Mizena & Alan Thanaset, 2007. "Predicting Directional Changes in Interest Rates: Gains from Using Information from Monetary Indicators," Discussion Papers 07/07, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    17. António Rua, 2012. "Money Growth and Inflation in the Euro Area: A Time-Frequency View," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 74(6), pages 875-885, December.
    18. Gallegati, Marco & Giri, Federico & Fratianni, Michele, 2019. "Money growth and inflation: International historical evidence on high inflation episodes for developed countries," Bank of Finland Research Discussion Papers 1/2019, Bank of Finland.
    19. Willie Lahari, 2011. "Assessing Business Cycle Synchronisation - Prospects for a Pacific Islands Currency Union," Working Papers 1110, University of Otago, Department of Economics, revised Oct 2011.
    20. Alfred A. Haug, 2006. "Canadian Money Demand Functions: Cointegration‐Rank Stability," Manchester School, University of Manchester, vol. 74(2), pages 214-230, March.
    21. Tayebi , Seyed Komail & Amini , Khaled Mohammad & Zamani , Zahra, 2012. "Inflation Determinants in Low and High Frequencies: An Implication of Spectral Analysis to Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 7(1), pages 119-137, October.

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    More about this item

    Keywords

    2 to 8 year cycles; 8 to 40 year cycles.; Band-pass filters;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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