Munich Personal RePEc Archive

Does global liquidity help to forecast US inflation?

D'Agostino, A and Surico, P (2007): Does global liquidity help to forecast US inflation? Forthcoming in:

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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.

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