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The Australian Monetary Base/Money Supply Relationship 1964–1977

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  • IAN G. SHARPE
  • PAUL A. VOLKER

Abstract

Utilizing bivariate techniques developed by Pierce and Haugh, the causal relationship between the Australian money supply (defined as either M1 or M3) and various monetary base measures is examined. The evidence generally suggests a two‐way causal or feedback relationship with a strong positive contemporaneity, a positive relationship between money and lagged base measures and a negative feedback (or policy reaction) between the monetary base and lagged money. It suggests the possibility of bias in ordinary least squares estimates of money/reserve base ‘reduced form’ relationships in the Australian context.

Suggested Citation

  • Ian G. Sharpe & Paul A. Volker, 1980. "The Australian Monetary Base/Money Supply Relationship 1964–1977," The Economic Record, The Economic Society of Australia, vol. 56(155), pages 331-337, December.
    • Handle: RePEc:bla:ecorec:v:56:y:1980:i:155:p:331-337
    DOI: 10.1111/j.1475-4932.1980.tb01686.x
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    References listed on IDEAS

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    1. Pierce, David A. & Haugh, Larry D., 1977. "Causality in temporal systems : Characterization and a survey," Journal of Econometrics, Elsevier, vol. 5(3), pages 265-293, May.
    2. Larry D. Haugh & David A. Pierce, 1977. "Causality in temporal systems: characterizations and a survey," Special Studies Papers 87, Board of Governors of the Federal Reserve System (U.S.).
    3. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    4. Ciccolo, John H, Jr, 1978. "Money, Equity, Values, and Income: Tests for Exogeneity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(1), pages 46-64, February.
    5. Feige, Edgar L & McGee, Robert T, 1977. "Money Supply Control and Lagged Reserve Accounting," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 9(4), pages 536-551, November.
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    Cited by:

    1. Allan P. Layton, 1983. "Is US Monetary Growth a Leading Indicator of Australian Monetary Growth?," The Economic Record, The Economic Society of Australia, vol. 59(2), pages 180-185, June.

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