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Government spending, GDP and exchange rate in Zero Lower Bound: measuring causality at multiple horizons

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  • MAO TAKONGMO, Charles Olivier

Abstract

This paper assesses the causality between government spending and gross domestic product in the United States at multiple horizons. We compare the Granger causality for normal periods (1959Q1 to 2006 Q4) with the causality for the ZLB period (2007Q1 to 2015Q4). We show that the Granger causality measures between government spending and GDP are very high and persistent in the ZLB period, but only if the exchange rate is not taken into account. When the exchange rate is taken into account, the Granger causality between government spending and GDP becomes very small and non-persistent.

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  • MAO TAKONGMO, Charles Olivier, 2016. "Government spending, GDP and exchange rate in Zero Lower Bound: measuring causality at multiple horizons," MPRA Paper 79703, University Library of Munich, Germany, revised 02 Jun 2017.
    • Handle: RePEc:pra:mprapa:79703
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    Cited by:

    1. Lebihan Laetitia & Olivier Mao Takongmo Charles & McKellips Fanny, 2018. "Health Disparities for Immigrants: Theory and Evidence from Canada," Review of Economics, De Gruyter, vol. 69(3), pages 183-206, December.
    2. LEBIHAN, Laetitia & MAO TAKONGMO, Charles Olivier & McKELLIPS, Fanny, 2017. "Health Inequalities for Immigrants in Canada : Quebec versus the Rest of Canada," MPRA Paper 79970, University Library of Munich, Germany, revised Jun 2017.

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    More about this item

    Keywords

    Zero Lower Bound; Causality Measures;

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • 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
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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