IIMR nominal income and money growth chart, 1981-2018. Click here to find out more about the effects of changes in money growth in prices (CPI and asset prices) and the business cycle. Click on the following link to download the source data as an Excel file.
M3 Data from National Central Banks and Nominal GDP Data from various sources.
Money determines income and the change in prices.
The chart above shows the average annual % change in quantity of money, broadly-defined, and nominal national income (or nominal GDP) in the various countries, 1981-2018. The relation between changes in the amount of money and changes in nominal income is quite evident in the data, and it does hold in very different economies all across the world.
An analysis of the correlation between the money supply and nominal GDP
As shown in the table on the left above, a 1% increase in the Money Supply (Broad money) leads to a positive and statistically significant increase in Nominal GDP of 0.982%, showing a strong correlation between the two variables. A similar result holds for the marginal effect of Money Supply on Inflation, described by the table on the right. In both regressions the 5 years moving average of the dependent variable has been used to capture the trend.
The scatter plots show a strong and positive correlation between the 5yr moving average of money growth and the 5yr moving average of both Nominal GDP and inflation (left and right hand side, respectively). Most of the observations for the panel of countries between 1980 and 2018 are clustered around a linear trend.