LONGER - TERM EFFECTS OF MONETARY GROWTH ON REAL AND NOMINAL VARIABLES , MAJOR INDUSTRIAL COUNTRIES , 1880 – 2001 by Alfred A . Haug

We study how fluctuations in money growth correlate with fluctuations in real and nominal output growth and inflation. We pick cycles from each time series that last 2 to 8 (business cycles) and 8 to 40 (longer-term cycles) years, using band-pass filters. We employ a data set from 1880 to 2001 for eleven countries, without gaps. Fluctuations in money growth do not play a systematic and important role at the business cycle frequency. However, money growth leads or contemporaneously affects nominal output growth and inflation in the longer run. This result holds despite differences in policies and institutions across countries. 4 ECB Working Paper Series No. 382 August 2004 JEL classification: E3