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The role of seasonality in economic time series reinterpreting money-output causality in U.S. data

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  • Lee, Hahn Shik
  • Siklos, Pierre L.

Abstract

While empirical evidence on the relationship between money and income has mainly been presented using seasonally adjusted data, seasonally unadjusted data are used in this paper to examine the time series behaviour of money, real GNP, and industrial production, at both the seasonal and zero frequencies based on tests of cointegration and seasonal cointegration. Two important conclusions are reached in the paper. First, although the univariate time series properties of M1 and real GNP appear to be very similar at both the seasonal and zero frequencies, seasonal comovements of M1 and real GNP turn out to be different from long- run comovements. Second, when seasonally unadjusted data are used, there appears to be no long-run relationship between money (M1 or M2) and output in the sense that the null of no cointegration cannot be rejected.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Forecasting.

Volume (Year): 13 (1997)
Issue (Month): 3 (September)
Pages: 381-391

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Handle: RePEc:eee:intfor:v:13:y:1997:i:3:p:381-391

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Web page: http://www.elsevier.com/locate/ijforecast

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References

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  1. Stock, James H. & Watson, Mark W., 1989. "Interpreting the evidence on money-income causality," Journal of Econometrics, Elsevier, vol. 40(1), pages 161-181, January.
  2. Engle, R. F. & Granger, C. W. J. & Hallman, J. J., 1989. "Merging short-and long-run forecasts : An application of seasonal cointegration to monthly electricity sales forecasting," Journal of Econometrics, Elsevier, vol. 40(1), pages 45-62, January.
  3. Lee, Hahn S. & Siklos, Pierre L., 1995. "A note on the critical values for the maximum likelihood (seasonal) cointegration tests," Economics Letters, Elsevier, vol. 49(2), pages 137-145, August.
  4. Engle, R. F. & Granger, C. W. J. & Hylleberg, S. & Lee, H. S., 1993. "The Japanese consumption function," Journal of Econometrics, Elsevier, vol. 55(1-2), pages 275-298.
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  11. Franses, Ph.H.B.F. & Kunst, R.M., 1998. "On the role of seasonal intercepts in seasonal cointegration," Econometric Institute Research Papers EI 9820, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
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Citations

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Cited by:
  1. Pami Dua & Lokendra Kumawat, 2010. "Modelling and Forecasting Seasonality in Indian Macroeconomic Time Series," Working Papers id:3005, eSocialSciences.
  2. Albertson, Kevin & Aylen, Jonathan, 2003. "Forecasting the behaviour of manufacturing inventory," International Journal of Forecasting, Elsevier, vol. 19(2), pages 299-311.
  3. Phillip Rothman & Dick van Dijk & Philip Hans Franses, 2000. "A Multivariate STAR Analysis of the Relationship Between Money and Output," Working Papers 0012, East Carolina University, Department of Economics.
  4. Omar A Mendoza Lugo, 2008. "The differential impact of real interest rates and credit availability on private investment: evidence from Venezuela," BIS Papers chapters, in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 501-537 Bank for International Settlements.
  5. Lee TongHung & Hwang Hoyoung, 2001. "Money, Interest Rate and Foreign Exchange Rate As Indicator Variables Of Monetary Policy," International Economic Journal, Taylor & Francis Journals, vol. 15(2), pages 77-98, June.
  6. Minoas Koukouritakis & Nikolaos Giannellis, . "Behavioural Equilibrium Exchange Rate and Total Misalignment: Evidence from the Euro Exchange Rate," Working Papers 0901, University of Crete, Department of Economics.
  7. Löf, Mårten & Franses, Philip Hans, 2000. "On Forecasting Cointegrated Seasonal Time Series," Working Paper Series in Economics and Finance 350, Stockholm School of Economics.
  8. Darne, Olivier, 2004. "Seasonal cointegration for monthly data," Economics Letters, Elsevier, vol. 82(3), pages 349-356, March.

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