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More Evidence on the Money-Output Relationship

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Author Info

  • Hafer, R W
  • Kutan, A M

Abstract

Recent studies have found that money loses its explanatory power over output if the 1980s are included in the sample. Interest rates, not money, appear to predict output. Using annual data for 1915-93 and quarterly data for 1960-93, the authors demonstrate that the supposed breakdown in the money-output relationship stems from the type of stationary assumption imposed on the data. Assuming difference-stationary produces results found in the literature. Assuming trend-stationary produces results indicating that money and output remain statistically related. Moreover, the change in the stationarity assumption greatly affects the quantitative importance of interest rates in explaining output. Copyright 1997 by Oxford University Press.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 35 (1997)
Issue (Month): 1 (January)
Pages: 48-58

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Handle: RePEc:oup:ecinqu:v:35:y:1997:i:1:p:48-58

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Cited by:
  1. Josef C. Brada & Ali M. Kutan, 2002. "The End of Moderate Inflation in Three Transition Economies?," William Davidson Institute Working Papers Series 433, William Davidson Institute at the University of Michigan.
  2. Jan Marc Berk & Gerbert Hebbink, 2006. "The anchoring of European inflation expectations," DNB Working Papers 116, Netherlands Central Bank, Research Department.
  3. Yannis Panagopoulos & Aristotelis Spiliotis, 2006. "Testing Money Supply Endogeneity: The Case of Greece (1975-1998)," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 85-102.
  4. Tracy Chan & Ramdane Djoudad & Jackson Loi, 2006. "Regime Shifts in the Indicator Properties of Narrow Money in Canada," Working Papers 06-6, Bank of Canada.
  5. R.W. Hafer, 2001. "What remains of monetarism?," Economic Review, Federal Reserve Bank of Atlanta, issue Q4, pages 13-33.
  6. Hayo, Bernd, 1998. "Money-output Granger causality revisited: An empirical analysis of EU countries," ZEI Working Papers B 08-1998, ZEI - Center for European Integration Studies, University of Bonn.
  7. R. W. Hafer & Ali M. Kutan, 2002. "Detrending and the Money-Output Link: International Evidence," Southern Economic Journal, Southern Economic Association, vol. 69(1), pages 159-174, July.
  8. William Gissy, 1999. "Treasury bill rates and treasury cash reserves," Atlantic Economic Journal, International Atlantic Economic Society, vol. 27(4), pages 435-443, December.
  9. Joe Haslag & R.W. Hafer & Garett Jones, 2003. "The Effect of Monetary Policy on Economic Output," Working Papers 0311, Department of Economics, University of Missouri.
  10. Ran, Jimmy & Voon, Jan P. & Li, Guangzhong, 2008. "Effects of foreign currency component in monetary aggregates on money neutrality," Economics Letters, Elsevier, vol. 99(3), pages 435-438, June.
  11. Dr.Godwin Chukwudum Nwaobi, 2004. "Money And Output Interraction In Nigeria," Macroeconomics 0405012, EconWPA.

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