Journal Article

Money growth, supply shocks, and inflation

Abstract: Recently, economists have examined the monetarist and the expectations-augmented Phillips-curve models of inflation to determine which model is a better predictor of the inflation rate. These studies raise an important question: Does money growth contain information that is useful in predicting the inflation rate? ; Joseph H. Haslag and D'Ann M. Ozment specify a general model of the inflation rate that encompasses both the Phillips-curve and the monetarist models. They find that their general, encompassing model is a better predictor of the inflation rate than either the monetarist model or the expectations-augmented Phillips-curve model of inflation. Furthermore, the authors find that changes in money growth play an important, independent role in predicting the inflation rate.

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Economic and Financial Policy Review

Publication Date: 1991

Issue: May

Pages: 1-17