U.S. Domestic Money, Inflation and Output

Posted: 19 Jul 2010 Last revised: 20 Aug 2011

See all articles by Yunus Aksoy

Yunus Aksoy

Birkbeck University of London

Tomasz Piskorski

Columbia Business School - Finance and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2006

Abstract

Recent empirical research documents that the strong short-term relationship between U.S. monetary aggregates on one side and inflation and real output on the other has mostly disappeared since the early 1980s. Using the direct estimate of flows of U.S. dollars abroad we find that domestic money (currency corrected for the foreign holdings of dollars) contains valuable information about future movements of U.S. inflation and real output. Statistical evidence suggests that the Friedman-Schwartz stylized facts can be reestablished once the focus of analysis is back on the correct measure of domestic monetary aggregates.

Keywords: Foreign holdings, Domestic money, Monetary aggregates, Information value

JEL Classification: E3, E4, E5

Suggested Citation

Aksoy, Yunus and Piskorski, Tomasz, U.S. Domestic Money, Inflation and Output (March 1, 2006). Journal of Monetary Economics, Vol. 53, No. 2, pp.183-197, 2006, Available at SSRN: https://ssrn.com/abstract=1644925

Yunus Aksoy

Birkbeck University of London ( email )

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Tomasz Piskorski (Contact Author)

Columbia Business School - Finance and Economics ( email )

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