Abstract

Several studies have emphasized the need to ‘filter’ the money growth and inflation data before a clear short-run intertemporal relation between them is revealed. When a simple filtering technique is employed to changes in money and prices, the correlation of the series tends to increase as the filter used shifts to lower frequency data. The technique also reveals a statistically significant relation between money and inflation, a pattern of Granger causality that has changed with changes in the monetary and exchange rate regime during 1965-2005, and much shorter leads/lags between money and inflation than those typically found in similar studies of the experience of developed economies.

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