Is US Monetary Growth a Leading Indicator of Australian Monetary Growth?

For an open economy the existence of internationally integrated goods and capital markets implies the country's monetary growth may be considerably influenced by fluctuations in international monetary circumstances. Theoretical literature exists which suggests US monetary growth may be catalytic in determining world monetary growth in general and the monetary growth of smaller. dependent economies in particular. In this paper, prima facie Australian statistical evidence is found which is consistent with this postulate. The lag in the association is identified and a model specified and estimated. A post-sample validation period supports and strengthens the within-sample results.