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Money, income and prices under fixed exchange rates: Evidence from causality tests and VARs

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  • Kamas, Linda
  • Joyce, Joseph P.

Abstract

This paper investigates the impact of changes in monetary variables on the domestic and foreign sectors, the determinants of central bank policy, and the response to foreign monetary changes in Mexico and India. Multivariate Granger-causality tests, variance decompositions and impulse response functions are utilized to examine propositions regarding causal relationships among key economic variables. The results indicate that domestic monetary policy did not affect output in either country. A substantial balance of payments offset to changes in domestic credit was found in India, but not for Mexico. The Mexican central bank pursued an accommodative monetary policy, but did not sterilize. In India, the central bank sterilized, but did not respond to income or price fluctuations. Output responded in each country to changes in foreign money.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 15 (1993)
Issue (Month): 4 ()
Pages: 747-768

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Handle: RePEc:eee:jmacro:v:15:y:1993:i:4:p:747-768

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Web page: http://www.elsevier.com/locate/inca/622617

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Cited by:
  1. Joseph Joyce & Linda Kamas, 1997. "The relative importance of foreign and domestic shocks to output and prices in Mexico and Colombia," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 133(3), pages 458-478, September.
  2. Masih, Abul M. M. & Masih, Rumi, 1996. "Empirical tests to discern the dynamic causal chain in macroeconomic activity: new evidence from Thailand and Malaysia based on a multivariate cointegration/vector error-correction modeling approach," Journal of Policy Modeling, Elsevier, vol. 18(5), pages 531-560, October.
  3. Masih, Rumi & Masih, Abul M. M., 1996. "Macroeconomic activity dynamics and Granger causality: New evidence from a small developing economy based on a vector error-correction modelling analysis," Economic Modelling, Elsevier, vol. 13(3), pages 407-426, July.
  4. Osman PEKER & Mehmet MERCAN, 2011. "The Inflationary Effect of Price Increases in Oil Products in Turkey," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 11(4), pages 553-562.

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