Template-type: ReDIF-Paper 1.0
Author-Name: Dr. Samuel Reynard
Author-Name-First: Samuel
Author-Name-Last: Reynard
Author-Person: pre151
Title: Money and the Great Disinflation
Abstract: Using U.S. and euro area data, this paper presents a significant and proportional relationship between money growth and subsequent inflation when accounting for equilibrium velocity movements due to inflation regimes changes. These movements, driven by money demand adjustments to low-frequency Fisherian interest rate variations, are derived from consistent U.S. and euro area money demand specifications - after contradictory coexisting results are explained. Not accounting for equilibrium velocity and interest rate movements biases cross-country and time series dynamic money growth / inflation estimated relationships, and leads to the non-proportional, non-significant, and reverse causality results found in studies that include the post-1980 period.
Length: 59 pages
Creation-Date: 2006
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2006/working_paper_2006_07
File-Format: text/html
Number: 2006-07
Classification-JEL: E52, E58, E41, E31
Keywords: money growth, inflation, equilibrium velocity, quantity theory, money demand
Handle: RePEc:snb:snbwpa:2006-07