Inflation and time great ratios: Long term evidence from the US

Using over 100 years of U.S. data, we find that the long-run effects of inf lation on consumption, investment, and output are positive. Also, great rat ios like the consumption and investment rates are not independent of inflat ion, which we interpret in terms of the Fisher effect. However, the variabi lity of the stochastic inflation trend is small relative to the variability of the productivity and fiscal trends. Thus, models generating long-term n egative effects of inflation on output and consumption seem to be at odds w ith data from the moderate inflation rate environment we consider. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: E31 and E32 .