Modelling money, price and output in India: a vector autoregressive and moving average (VARMA) approach
AbstractThe present study has two purposes. First, the study examines the most substantive and debatable question: Is there any long-run relationship among money, price and output? It has been found by applying different tests of cointegration that there is no long-run relationship among these three variables in cointegration sense. Second, having ascertained that the variables under study are not cointegrated, an attempt is made to explore the short-run relationship among money, price and output exploiting the characteristics of the Vector Autoregressive and Moving Average (VARMA) model. Sub-set concept has been used to identify the best-fitted VARMA model. The paper concludes the following: (i) both money and price affect each other and there exists bi-directional causality; (ii) output affects price and there is also feedback between price and output; and (iii) money unidirectionally affects output. Various consequences of cointegration on parameter estimates of pure VAR/VARMA in difference have been discussed. Here it may be mentioned that pure VAR/VARMA in differences is not misspecified, as it could have been otherwise in the case where variables are cointegrated. However, as VARMA is more parsimonious than VAR, the VARMA model has been considered here. Attention has been paid regarding the proper transformations of the variables.
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.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 35 (2003)
Issue (Month): 10 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RAEC20
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Lee, Chin, 2013. "The Role of Macroeconomic Fundamentals in Malaysian Post Recession Growth," MPRA Paper 44808, University Library of Munich, Germany.
- Sa-ngasoongsong, Akkarapol & Bukkapatnam, Satish T.S. & Kim, Jaebeom & Iyer, Parameshwaran S. & Suresh, R.P., 2012. "Multi-step sales forecasting in automotive industry based on structural relationship identification," International Journal of Production Economics, Elsevier, vol. 140(2), pages 875-887.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.