Does Global Liquidity Help to Forecast US Inflation?

Journal of Money, Credit and Banking, Forthcoming

14 Pages Posted: 7 Dec 2007 Last revised: 12 Aug 2009

See all articles by Antonello D'Agostino

Antonello D'Agostino

European Stability Mechanism; Central Bank and Financial Services Authority of Ireland - Economic Analysis and Research Department

Paolo Surico

London Business School - Department of Economics; Centre for Economic Policy Research (CEPR)

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.

JEL Classification: E37, E47, C22, C53

Suggested Citation

D'Agostino, Antonello and Surico, Paolo, Does Global Liquidity Help to Forecast US Inflation?. Journal of Money, Credit and Banking, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1055781

Antonello D'Agostino (Contact Author)

European Stability Mechanism ( email )

6a Circuit de la Foire Internationale
L-1347
Luxembourg

Central Bank and Financial Services Authority of Ireland - Economic Analysis and Research Department ( email )

Dame Street
P.O. Box 559
Dublin 2
Ireland

Paolo Surico

London Business School - Department of Economics ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

HOME PAGE: http://sites.google.com/site/paolosurico

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

HOME PAGE: http://sites.google.com/site/paolosurico

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