U.S. domestic money, inflation and output |
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Authors: | Yunus Aksoy Tomasz Piskorski |
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Institution: | a Birkbeck College, University of London, Malet Street, London WC1E 7HX, UK b Department of Economics, Stern School of Business, New York University, 44 West 4th Street, New York, NY 10012, USA |
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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. |
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Keywords: | E3 E4 E5 |
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