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.
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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.
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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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This article concludes the analysis of the correlation patterns between the M2 Money Supply and Consumer Inflation (CPI). The last of the three types of inflation patterns (time periods with no significant inflation trends) is the subject of analysis here. The other two types of patterns (inflation surges1 and disinflation/deflation surges2) were analyzed previously. The conclusion discusses the correlation patterns for all time periods, looks for any common threads, and identifies important differences across time periods and types of correlation patterns.
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The full data sets for the 64 years from 1959 to 2022 show no discernable association patterns (correlations) for M2 money supply growth and consumer inflation changes.1 This post continues that analysis by looking specifically at the various regimes of inflation change during the 64-year timeline. This article analyzes the association of CPI with M2 during the four periods from 1959 to 2022 with negative inflation changes (disinflation/deflation) surges.
Image by Kevin Schneider from Pixabay
The full data sets for the 64 years from 1959 to 2022 show no discernable association patterns (correlations) for M2 money supply growth and consumer inflation changes.1 This post continues that analysis by looking specifically at the various regimes of inflation change during the 64-year timeline.
From an image by Qubes Pictures from Pixabay
We have found that the correlation relationships between various types of credit and inflation are variable over time. So far, the kinds of credit studied are government deficit spending,1,6 consumer credit,2 mortgage debt,3 nonfinancial corporate credit,4 and financial sector debt.5 Here, we examine the relationship between the total money supply (M2) and Consumer Price Index (CPI) inflation.7
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Two studies have been performed on the correlations between U.S. Federal Deficit Spending and CPI Inflation. The first used federal deficits for fiscal years between 1914 and 2022. The second study used the quarterly data available for federal deficit spending starting in 1966. This article is the second to compare the results of the two studies.
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