This paper examines the performance of M1 in an indicator-model of inflation over time horizons as long as 16 quarters into the future. The central conclusion of the paper is that, in addition to the output gap, the cumulative growth of M1 and the deviations of M1 from its long-run path provide...

A vector error-correction model (VECM) that forecasts inflation between the current quarter and eight quarters ahead is found to provide significant leading information about inflation. The model focusses on the effects of deviations of M1 from its long-run demand but also includes, among other...