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Assessing the causal relationship between euro-area money and prices in a time-varying environment

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Author Info

  • Hall, Stephen G.
  • Hondroyiannis, George
  • Swamy, P.A.V.B.
  • Tavlas, George S.

Abstract

The paper provides new evidence on the causal relationship between money and price for the euro area using quarterly data for the period 1980 to 2006, employing two alternative methods of estimation: the vector error correction (VEC) and time-varying coefficient (TVC) estimation techniques. The latter technique has the advantage over the former technique in that it can deal with possible specification biases and spurious relationships that may have arisen from structural changes. The empirical results from the VEC method reveal a bidirectional causal relationship between money and prices. The results from the TVC technique suggest that money is acting as an exogenous process determining the price level.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 26 (2009)
Issue (Month): 4 (July)
Pages: 760-766

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Handle: RePEc:eee:ecmode:v:26:y:2009:i:4:p:760-766

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Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Causality between money and price VEC TVC estimation Euro area;

References

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Citations

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Cited by:
  1. Arslanturk, Yalcin & Balcilar, Mehmet & Ozdemir, Zeynel Abidin, 2011. "Time-varying linkages between tourism receipts and economic growth in a small open economy," Economic Modelling, Elsevier, vol. 28(1), pages 664-671.
  2. Smith, Ron P. & Tasiran, Ali, 2010. "Random coefficients models of arms imports," Economic Modelling, Elsevier, vol. 27(6), pages 1522-1528, November.
  3. Ansgar Belke & Jens Klose, 2010. "(How) Do the ECB and the Fed React to Financial Market Uncertainty? – The Taylor Rule in Times of Crisis," Ruhr Economic Papers 0166, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  4. Fredj Jawadi & Ricardo M. Sousa, 2012. "Money Demand in the euro area, the US and the UK:Assessing the Role of Nonlinearity," NIPE Working Papers 22/2012, NIPE - Universidade do Minho.

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