Do temporal causality tests provide information on policy dominance?
AbstractA number of recent papers have raised serious questions about the validity of the German dominance hypothesis, using Granger (temporal) causality tests. If Germany dominates within the European Monetary System, then German monetary policy, measured by either money stocks or interest rates should Granger (temporally) cause other EMS countries’ monetary policies, but not vice versa. Empirical evidence leads analysts to conclude that the German dominance hypothesis is invalid, or at a minimum, in need of significant reformulation. Explores similar Granger causality tests, using the recent cointegration and error-correction modelling strategy, for the US and a group of developing countries during the Bretton Woods period, where conventional wisdom suggests that US policy dominated. Finds significant evidence of two-way causality between the US money stock and the money stocks of a large number of developing countries. These findings raise a serious questions about the interpretation and/or appropriateness of the Granger causality test for investigating policy dominance hypotheses.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Emerald Group Publishing in its journal Journal of Economic Studies.
Volume (Year): 24 (1997)
Issue (Month): 6 (October)
Contact details of provider:
Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Al Awad, Mouawiya & Goodwin, Barry K., 1998. "Dynamic linkages among real interest rates in international capital markets," Journal of International Money and Finance, Elsevier, vol. 17(6), pages 881-907, December.
- Angelos Kanas & Georgios Tsiotas, 2005. "Real interest rates linkages between the USA and the UK in the postwar period," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 10(3), pages 251-262.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman).
If references are entirely missing, you can add them using this form.