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Commentary

M3

Roger Ferguson

Fri, May 27, 2005

In contrast, the link between monetary growth, as measured by M3, and changes in real house prices appears to be more definite. The bottom panel of figure 1 shows a similar scatter plot for the same group of countries and periods as in the upper panel, but for changes in real house prices. The two series exhibit a small positive correlation that is statistically significant. Moreover, various tests have shown that the correlation is not just a recent phenomenon or confined to a few countries; it is evident in varying degrees both over time and across our sample of sixteen countries. Again, this finding is consistent with findings from a number of other academic researchers.