The money-inflation nexus revisited

Ringwald, Leopold and Zörner, Thomas O. ORCID: https://orcid.org/0000-0001-7830-7801 (2021) The money-inflation nexus revisited. Department of Economics Working Paper Series, 310. WU Vienna University of Economics and Business, Vienna.

[img]
Preview
Text
WP310.pdf

Download (2MB) | Preview

Abstract

This paper proposes a Bayesian Logistic Smooth Transition Autoregressive (LSTAR) model with stochastic volatility (SV) to model inflation dynamics in a nonlinear fashion. Inflationary regimes are determined by smoothed money growth which serves as a transition variable that governs the transition between regimes. We apply this approach on quarterly data from the US, the UK and Canada and are able to identify well-known, high inflation periods in the samples. Moreover, our results suggest that the role of money growth is specific to the economy under scrutiny. Finally, we analyse a variety of different model specifications and are able to confirm that adjusted money growth still has leading indicator properties on inflation regimes.

Item Type: Paper
Keywords: Money-inflation link, Nonlinear modeling, Bayesian inference, LSTAR-SV model
Classification Codes: JEL C11, C32, E31, E51
Divisions: Departments > Volkswirtschaft
Depositing User: Claudia Tering-Raunig
Date Deposited: 10 Mar 2021 11:32
Last Modified: 11 Mar 2021 08:42
FIDES Link: https://bach.wu.ac.at/d/research/results/98976/
URI: https://epub.wu.ac.at/id/eprint/8032

Actions

View Item View Item

Downloads

Downloads per month over past year

View more statistics