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Cointegration and Granger Causality tests on Spanish and German Consumer Prices

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  • Anna Saiti

Abstract

This paper employs cointegration and Granger causality tests to determine a relationship between the Spanish and the German inflation for the sample period 1976:1-1999:4 employing quarterly data. The results suggest that there is a bi-directional causality between German and Spanish inflation for the entire period as well as for the first sub-period. In the second subperiod (1986:1-1999:4) there was a stronger influence of German on Spanish prices in the short run than in the long run. This implies that not only Germany has a substantial influence on Spain, but also Spain's inflation affects Germany in a significant way. Thus, Germany can be considered as an influential country, which plays a significant role in the EU.

Suggested Citation

  • Anna Saiti, 2004. "Cointegration and Granger Causality tests on Spanish and German Consumer Prices," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 93-110.
    • Handle: RePEc:ers:journl:v:vii:y:2004:i:1-2:p:93-110
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    More about this item

    Keywords

    Inflation; Cointegration; Causality; German Dominance;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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