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Dependence Structure Between Money And Economic Activity: A Markov-Switching Copula Vec Approach

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  • Serletis, Apostolos
  • Xu, Libo

Abstract

This paper examines correlation and dependence structures between money and the level of economic activity in the USA in the context of a Markov-switching copula vector error correction model. We use the error correction model to focus on the short-run dynamics between money and output while accounting for their long-run equilibrium relationship. We use the Markov regime-switching model to account for instabilities in the relationship between money and output, and also consider different copula models with different dependence structures to investigate (upper and lower) tail dependence.

Suggested Citation

  • Serletis, Apostolos & Xu, Libo, 2022. "Dependence Structure Between Money And Economic Activity: A Markov-Switching Copula Vec Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 26(8), pages 2141-2160, December.
    • Handle: RePEc:cup:macdyn:v:26:y:2022:i:8:p:2141-2160_6
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