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Does Global Liquidity Help to Forecast U.S. Inflation?
Author(s) -
D'AGOSTINO ANTONELLO,
SURICO PAOLO
Publication year - 2009
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2009.00216.x
Subject(s) - market liquidity , economics , inflation (cosmology) , econometrics , autoregressive model , construct (python library) , phillips curve , monetary economics , vector autoregression , monetary policy , computer science , physics , theoretical physics , programming language
We construct a measure of global liquidity using the growth rates of broad money for the G7 economies. Global liquidity produces forecasts of U.S. inflation that are significantly more accurate than the forecasts based on U.S. money growth, Phillips curve, and autoregressive and moving average models. The marginal predictive power of global liquidity is strong at 3‐year horizons. Results are robust to alternative measures of inflation.