Forecasting with Monetary Aggregates: Recent Evidence for the United States

Elger, Thomas; Jones, Barry E.; Nilsson, Bo

doi:10.1016/j.jeconbus.2006.06.004

Cited by 16 publications

(15 citation statements)

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“…Table 6 shows that the construction of Divisia monetary aggregates does not lead to substantial changes in targeting inflation and real GDP. The same conclusion is found by Elger et al (2006). …”

Section: Forecasting Ability Of Divisia Monetary Aggregates Versus Sisupporting

confidence: 87%

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Empirical Performance of Monetary Aggregates in BEAC and BCEAO

Ndjokou¹

2013

RAE

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The aim of this study is to compare empirical performance of traditional as well as Divisia monetary aggregates. This evidence comes from the comparison of their relative performance in terms of real GDP and inflation within 1992.1 and 2007.4. For this purpose, the study uses in-sample and out-of-sample approaches. The in-sample approach focuses on variance decomposition analysis. Concerning out-of-sample analysis, a forecasting model is estimated through 2003:4 and forecast are generated for the period 2004:1-2007:4. The study leads to the following results. Inflation and real GDP are better explained respectively by Divisia M2 and simple sum M2 in BEAC. In BCEAO, the contribution of each monetary aggregate to the fluctuations of inflation and real GDP is very worst except simple sum M2 in explaining price level. Considering the forecasting ability, it appears that at the narrowest level of aggregation, there is no difference between the two types of monetary aggregates in the two Central Banks. At the broader level, Divisia M2 has a slight edge over traditional M2 in predicting real GDP in BEAC. In BCEAO, simple sum M2 dominates Divisia M2 in explaining inflation. JEL Classification: B22 C32 C43 C53 E52

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Section: Forecasting Ability Of Divisia Monetary Aggregates Versus Sisupporting

confidence: 87%

“…By, looking at the information content, the superiority of Divisia monetary aggregate is confirmed. Along the same line, Elger et al (2006) demonstrate that the aggregation method has no significative impact on inflation and growth forecasting.…”

Section: Divisia Versus Simple Sum Monetary Aggregates: a Review Of Ementioning

confidence: 75%

Empirical Performance of Monetary Aggregates in BEAC and BCEAO

Ndjokou¹

2013

RAE

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“…8 Nelson (2002) Weak separability also implies that the monetary aggregate is unaffected by pure shifts in the composition of spending on nonmonetary goods and, therefore, depends on total income, but not on the composition of expen ditures (see Swofford and Whitney, 1991, p. 752 Stock and Watson (1999), Schunk (2001), Drake and Mills (2005), and Elger, Jones, and Nilsson (2006). Stock and Watson (1999) investigate whether or not monetary aggregates could be used to improve upon inflation forecasts for the US (at the four quarters horizon) based on Phillips curve models, which could be motivated by appealing to the quantity theory of money.…”

Section: Introductionmentioning

confidence: 99%

Admissible monetary aggregates for the euro area

Binner

Bissoondeeal

Elger

et al. 2009

Journal of International Money and Finance

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Aston Academy for Research in Management is the administrative centre for all research activities at Aston Business School. The School comprises more than 70 academic staff organised into thematic research groups along with a Doctoral Programme of more than 50 research students. Research is carried out in all of the major areas of business studies and a number of specialist fields. For further information contact:The Research Director, Aston Business School, Aston University, Birmingham B4 7ET

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“…For comparison purposes, we also explore several interest rate variables. Our forecasting experiment builds on several recent papers including Schunk (2001), Drake and Mills (2005), Elger et al (2006) and Bachmeier et al (2007), but is novel in several aspects.…”

Section: Accepted M Manuscriptmentioning

confidence: 99%

“…This provides us with eight monetary aggregates. In addition to these publicly available Divisia monetary aggregates, we also used Divisia monetary aggregates from Elger et al (2006). The main difference between these alternative Divisia aggregates and the ones maintained by the Federal Reserve Bank of St. Louis is choice of the benchmark rate that is used in measurement of assets' opportunity costs.…”

Section: Monetary Aggregatesmentioning

confidence: 99%

Does Money Matter in Inflation Forecasting?

Binner

Tiňo²,

Tepper³

et al. 2010

SSRN Journal

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This paper provides the most fully comprehensive evidence to date on whether or not monetary aggregates are valuable for forecasting US inflation in the early to mid 2000s. We explore a wide range of different definitions of money, including different methods of aggregation and different collections of included monetary assets. In our forecasting experiment we use two non-linear techniques, namely, recurrent neural networks and kernel recursive least squares regression -techniques that are new to macroeconomics. Recurrent neural networks operate with potentially unbounded input memory, while the kernel regression technique is a finite memory predictor. The two methodologies compete to find the best fitting US inflation forecasting models and are then compared to forecasts from a naive random walk model. The best models were non-linear autoregressive models based on kernel methods. Our findings do not provide much support for the usefulness of monetary aggregates in forecasting inflation.

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Forecasting with Monetary Aggregates: Recent Evidence for the United States

Cited by 16 publications

References 50 publications

Empirical Performance of Monetary Aggregates in BEAC and BCEAO

Empirical Performance of Monetary Aggregates in BEAC and BCEAO

Admissible monetary aggregates for the euro area

Does Money Matter in Inflation Forecasting?

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