NBER Working Papers by Steven L. Green

For the period 1959-1972 money growth in the United States was positively correlated with past inflation and negatively correlated with past unemployment, whereas for the period 1973-1984 this correlation pattern was reversed. International data, moreover, show that the eight largest western economies exhibit a wide variety of patterns for these correlations, and these patterns seem to be unrelated to average inflation. Theoretical analysis reveals that a model in which the monetary authority is concerned only with controlling inflation is consistent with any pattern of sample correlations of money growth with past inflation and past unemployment. This analysis suggests that international differences in these sample correlations result from differences in the sample variances of disturbanc...