Template-Type: ReDIF-Article 1.0

Author-Name: Peter Simon
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Email: simonp@mnb.hu
Author-Person:  

Title: Analysis of the Relationship between Money Growth and Inflation Using Wavelet Coherency

Abstract: Different theories of money lead to different conclusions about whether there is
a stable long-run relationship between money growth and inflation. In this analysis,
the author examines the wavelet coherency between the growth in the M2 monetary
aggregate and inflation in Hungary. Based on the findings, there is no robust
long-run relationship between the two variables. When filtering out movements
in the HUF exchange rate, the coherency between money growth and inflation is
eliminated even over the period from the mid-2000s to the early 2010s. This also
empirically supports the assumption that monetary policy does not affect inflation
by shaping the money supply.

Classification-JEL: C10, E31, E40
Keywords: inflation, money supply, interest rates, wavelet transform
Pages: 58-81
Volume: 22
Issue: 4
Year: 2023
File-URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-22-4-st2-simon.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:22:y:2023:i:4:p:58-81