Discussion paper

DP5868 Money at Low Frequencies

Many central banks have abandoned monetary targeting because the link between money growth and inflation seemed to disappear in the 1980s. Using spectral regression techniques, we show that for the euro area, Japan, the UK and the US there is a unit relationship between money growth and inflation at low frequencies when the impact of interest rate changes on money demand is accounted for. We estimate Phillips-curve equations in which the low-frequency information from money growth is combined with high-frequency information from the output gap to explain movements in inflation.


Gerlach, S and K Assenmacher (2006), ‘DP5868 Money at Low Frequencies‘, CEPR Discussion Paper No. 5868. CEPR Press, Paris & London. https://cepr.org/publications/dp5868