This post ranks the associations between changes in various sources of money and subsequent CPI inflation for inflationary surges from 1952 to 2023.
Image by Gerd Altmann from Pixabay.
Last week’s results show that confounding is possible for correlations of Household and Nonprofit Organization (HNO) Credit changes and Nonfinancial Corporate (NFC) Debt changes with subsequent CPI inflation changes.1 This post adds some detail to those observations.
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Previous results1 show that during a specific inflation surge, Household and Nonprofit Organization (HNO) Credit changes and Nonfinancial Corporate (NFC) Debt changes are correlated with each other and with subsequent CPI inflation changes. In such situations, confounding of associations are possible.
Confounding can be an issue when analyzing the association between quantities of money and inflation. Last week, we looked closely at a possible example of confounding. This week, we consider that example further.
Image by Richard Reid from Pixabay.
Confounding can be an issue in analyzing the association between quantities of money and inflation. In this post, we look more closely at a possible example of confounding.
Photo by Daniele Levis Pelusi on Unsplash.
We have found that the correlation relationships between various types of credit and inflation are variable over time. The same is true for the M2 money supply. The sources of credit studied are government deficit spending,1,6 consumer credit,2 mortgage debt,3 nonfinancial corporate credit,4 and financial sector debt.5 The correlation between the M2 money supply and inflation was reported here.7 The measure of inflation for these studies was the Consumer Price Index (CPI).8 In this and subsequent posts, we will review the results of previous studies. The objectives will be to understand the quantity of money vs. inflation correlation studies’ potential limitations and rank the observed correlations for possible importance.
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