Monetary Base Growth, Deposit Growth, and Inflation in the Postwar United States.

In this article, the authors examine the impact of monetary-base growth on inflation in the post-World War II United States. The most significant and stable empirical relationship is between monetary base growth and inflation. However, the authors also find that non-interest-bearing demand deposit growth has an impact on inflation. The relation between demand deposit growth and inflation was strongest during the Bretton Woods era, but apparently remains significant in the post-Bretton Woods period. The authors' results indicate that newer interest-bearing transactions deposits in M1, as well as in M2-category deposits, play no role in inflation. Copyright 1991 by University of Chicago Press.