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A direct test of the endogeneity of money: Implications for Gulf Cooperation Council (GCC) countries

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  • Tas, Bedri Kamil Onur
  • Togay, Selahattin

Abstract

This paper contributes to the ongoing discussion about the endogeneity of money supply by empirically investigating the GCC countries. We propose and implement a direct test of money supply endogeneity that depends on econometric specification of exogeneity which has not been used in the literature before. To be able to make comparisons with previous studies, we also conducted Granger Causality tests to analyze the causality relationship between bank credit and money supply. Both of the empirical studies provide empirical evidence for the endogeneity of money supply in GCC countries. The results of the paper have many significant monetary policy implications for the upcoming monetary unification of the GCC countries.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 3 ()
Pages: 577-585

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Handle: RePEc:eee:ecmode:v:29:y:2012:i:3:p:577-585

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

Related research

Keywords: GCC Countries; Endogenous money supply; Monetary union; Post Keynesian monetary theory;

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References

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  1. Giuseppe Fontana, 2003. "Post Keynesian Approaches to Endogenous Money: A time framework explanation," Review of Political Economy, Taylor & Francis Journals, vol. 15(3), pages 291-314.
  2. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2007. "Enhanced routines for instrumental variables/GMM estimation and testing," Boston College Working Papers in Economics 667, Boston College Department of Economics, revised 05 Sep 2007.
  3. Perron, P., 1986. "Trends and Random Walks in Macroeconomic Time Series: Further Evidence From a New Approach," Cahiers de recherche 8650, Universite de Montreal, Departement de sciences economiques.
  4. Robert Pollin, 1991. "Two Theories of Money Supply Endogeneity: Some Empirical Evidence," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 13(3), pages 366-396, April.
  5. Bala Shanmugam & Mahendhiran Nair & Ong Wee Li, 2003. "The endogenous money hypothesis: empirical evidence from Malaysia (1985-2000)," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 25(4), pages 599-611, July.
  6. Shirley J. Gedeon, 2009. "Money supply endogeneity under a currency board regime: the case of Bosnia and Herzegovina," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 32(1), pages 97-114, September.
  7. Howells, Peter & Hussein, Khaled, 1998. "The Endogeneity of Money: Evidence from the G7," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(3), pages 329-40, August.
  8. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
  9. Shafik Hebous, 2006. "On the Monetary Union of the Gulf States," Kiel Advanced Studies Working Papers 431, Kiel Institute for the World Economy.
  10. Yannis Panagopoulos & Aristotelis Spiliotis, 2008. "Alternative money theories: a G7 testing," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 30(4), pages 601-622, July.
  11. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  12. Mervyn King, 1994. "Monetary policy in the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 15(3), pages 109-28, August.
  13. Alfonso Palacio Vera, 2001. "The Endogenous Money Hypothesis: Some Evidence from Spain (1987-1998)," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 23(3), pages 509-526, April.
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Cited by:
  1. Syed Basher & Stefano Fachin, 2012. "Investigating Long-Run Demand for Broad Money in the Gulf Arab Countries," DSS Empirical Economics and Econometrics Working Papers Series 2012/6, Centre for Empirical Economics and Econometrics, Department of Statistics, "Sapienza" University of Rome.
  2. Gani, Azmat & Al Mawali, Nasser Rashid, 2013. "Oman's trade and opportunities of integration with the Asian economies," Economic Modelling, Elsevier, vol. 31(C), pages 766-774.

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