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Does global liquidity help to forecast US inflation?

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  • D'Agostino, A
  • Surico, P

Abstract

We construct a measure of global liquidity using the growth rates of broad money for the G7 economies. Global liquidity produces forecasts of US inflation that are significantly more accurate than the forecasts based on US money growth, Phillips curve, autoregressive and moving average models. The marginal predictive power of global liquidity is strong at three years horizons. Results are robust to alternative measures of inflation.

Suggested Citation

  • D'Agostino, A & Surico, P, 2007. "Does global liquidity help to forecast US inflation?," MPRA Paper 6283, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:6283
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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