Revisiting money-output causality from a Bayesian logistic smooth transition VECM perspective
AbstractThis paper proposes a Baysian approach to explore money-output causality within a logistic smooth transition VECM framework. Our empirical results provide substantial evidence that the postwar US money-output relationship is nonlinear, with regime changes mainly governed by the lagged inflation rates. More importantly, we obtain strong support for long-run non-causality and nonlinear Grangercausality from money to output. Furthermore, our impulse response analysis reveals that a shock to money appears to have negative accumulative impact on real output over the next fifty years, which calls for more caution when using money as a policy instrument.
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Bibliographic InfoPaper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 08/5.
Date of creation: Jan 2008
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-26 (All new papers)
- NEP-CBA-2008-01-26 (Central Banking)
- NEP-ETS-2008-01-26 (Econometric Time Series)
- NEP-MAC-2008-01-26 (Macroeconomics)
- NEP-MON-2008-01-26 (Monetary Economics)
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