HC Deb 22 July 1980 vol 989 cc684-5W
Mr. Stuart Holland

asked the Chancellor of the Exchequer what has been the correlation between the rate of increase of aggregate prices and the rate of increase of money supply M3 since 1974.

Mr. Lawson

[pursuant to his reply, 28 July 1980, c. 478.]: The table below gives the correlation coefficient between year-on-year changes in the RPI and the sterling M3 money aggregate, when the latter is lagged from zero to 12 quarters. The correlation is negative for lags 0–2 and positive for lags 3–12. These coefficients were estimated for price changes between the first quarter of 1974 and the last quarter of 1979.

Lag(quarters) Correlation coefficient R2
0 —.526 .277
1 —.34 .112
2 —.162 .026
3 .018 .000
4 .201 .040
5 .405 .164
6 .594 .353
7 .723 .523
8 .773 .597
9 .759 .576
10 .728 .529
11 .681 .464
12 .643 .413