Money and inflation


Some references about Granger causality and money supply.

« A means for determining whehter a A variable can be said to have causal influence on a variable B. If we observe that money-supply increases are followed with inflation, we cannot say that money supply causes inflation. It may be that both money-supply and inflation are caused by something else. Under the Granger test of causation, a time series of both money supply and inflation is taken, and each is stripped of any independent long-term trends that may exhibit. Then the values of money supply and inflation are regressed against each other. Money-supply can be said to cause inflation if in such analysis: (a) values of inflation are explained by values of previous money supply, and (b) values of money supply are explained by future values of inflation. » G. Bannock, R. E. Baxter, E. Davis. The PENGUIN DICTIONARY OF Economics,The seventh edition.

Read also an intersting article about this subject matter by going to :
https://www.real-statistics.com/time-series-analysis/time-series-miscellaneous/granger-causality/

📖 Other references about money supply