Volume 16 Issue 2 (April-June 2000)

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New dogs and old tricks: do money and interest rates still provide information content for forecasts of output and prices?

Black, D.C. , Corrigan, P.R. , Dowd, M.R.
Pages 191-205

Out-of-sample forecasting experiments are used as an alternative to looking at F-statistics when examining whether money, interest rates or the commercial paper/T-bill spread provide information content for subsequent movements in output, real and nominal personal income, the CPI and the PPI. Here, a variable provides information if it improves the forecast of the explained variable. Employing this procedure we find that the paper-bill spread but not monetary aggregates provide information content for industrial production or real personal income when using data over the 1980-1997 period. In contrast, we find that monetary aggregates provide information content for the CPI and nominal personal income but not the PPI.

Keywords: Macroeconomic forecasting: industrial production, personal income, inflation , Time series , [jel] E. Macroeconomics and monetary economics , [jel] E4. Money and interest rates
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