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Does global liquidity help to forecast U.S. inflation?

Journal

Journal of Money, Credit, and Banking

Subject

Economics

Publishing details

Journal of Money, Credit, and Banking 2009 Vol 41:2/3 p 479-489

Authors / Editors

D'Agostino A;Surico P

Biographies

Paolo Surico

Publication Year

2009

Abstract

We construct a measure of global liquidity using the growth rates of broad money for the G7 economies. Global liquidity produces forecasts of U.S. inflation that are significantly more accurate than the forecasts based on U.S. money growth, Phillips curve, and autoregressive and moving average models. The marginal predictive power of global liquidity is strong at 3-year horizons. Results are robust to alternative measures of inflation.

Keywords

Predictive accuracy; Global liquidity; Money growth; Inflation

Available on ECCH

No


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