Long Run Evidence On Money Growth And Inflation

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Executive Summary

Over the last two centuries, the cross-spectral coherence between either narrow or broad money growth and inflation at the frequency ?=0 has exhibited little variation - being, most of the time, close to one - in the U.S., the U.K., and several other countries, thus implying that the fraction of inflation's long-run variation explained by long-run money growth has been very high and relatively stable. The cross-spectral gain at ?=0, on the other hand, has exhibited significant changes, being for long periods of time smaller than one.

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