Assessing the Money, Exchange Rate, Price Links during Hyperinflationary Episodes in the Democratic Republic of the Congo
AbstractThe determination of the causal pattern among inflation, money growth, and exchange rate has important implications for policymakers regarding appropriate stabilization policies in developing economies. Using Congolese data where the pace of broad money growth and hyperinflation (23,760% annual change) reached record levels in early 1990s, we use single−equation multivariate autoregressive models with the optimal lag selected using Hsiaofs approach to Granger causality. Results indicate feedback causality between inflation and money growth on one side, and unidirectional Granger causality from money growth to the exchange rate and from the exchange rate to inflation on the other. These results suggest that the over−riding goal of disinflation needs to be accomplished initially by exchange rate stabilization, followed by a direct inflation targeting.
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 InfoPaper provided by EconWPA in its series Development and Comp Systems with number 0511023.
Length: 12 pages
Date of creation: 22 Nov 2005
Date of revision:
Note: Type of Document - pdf; pages: 12. Inflation in the DR Congo
Contact details of provider:
Web page: http://18.104.22.168
Congo Inflation Hsiao's version of Granger Causality;
Other versions of this item:
- Jean-Claude Maswana, 2005. "Assessing the Money, Exchange Rate, Price Links during Hyperinflationary Episodes in the Democratic Republic of the Congo," Economics Bulletin, AccessEcon, vol. 15(19), pages 1-10.
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-12-01 (All new papers)
- NEP-MAC-2005-12-01 (Macroeconomics)
- NEP-MON-2005-12-01 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Cheng, Benjamin S. & Lai, Tin Wei, 1997. "An investigation of co-integration and causality between energy consumption and economic activity in Taiwan," Energy Economics, Elsevier, vol. 19(4), pages 435-444, October.
- Matias Vernengo, 2005. "Money and Inflation: A Taxonomy," Working Paper Series, Department of Economics, University of Utah 2005_14, University of Utah, Department of Economics.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
- Sargent, Thomas J & Wallace, Neil, 1973. "Rational Expectations and the Dynamics of Hyperinflation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 328-50, June.
- Hsiao, Cheng, 1982. "Autoregressive modeling and causal ordering of economic variables," Journal of Economic Dynamics and Control, Elsevier, vol. 4(1), pages 243-259, November.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Webb, Steven B, 1985. "Government Debt and Inflationary Expectations as Determinants of the Money Supply in Germany, 1919-23," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(4), pages 479-92, November.
- Peter C.B. Phillips & Pierre Perron, 1986.
"Testing for a Unit Root in Time Series Regression,"
Cowles Foundation Discussion Papers
795R, Cowles Foundation for Research in Economics, Yale University, revised Sep 1987.
- Tom Doan, . "PPUNIT: RATS procedure to perform Phillips-Perron Unit Root test," Statistical Software Components RTS00160, Boston College Department of Economics.
- Phillips, P.C.B., 1986. "Testing for a Unit Root in Time Series Regression," Cahiers de recherche 8633, Universite de Montreal, Departement de sciences economiques.
- Burdekin, Richard C. K. & Burkett, Paul, 1996. "Hyperinflation, the exchange rate and endogenous money: post-World War I Germany revisited," Journal of International Money and Finance, Elsevier, vol. 15(4), pages 599-621, August.
- Elie Canetti & Joshua E. Greene, 1991. "Monetary Growth and Exchange Rate Depreciation as Causes of Inflation in African Countries: An Empirical Analysis," IMF Working Papers 91/67, International Monetary Fund.
- Hsiao, Cheng, 1981. "Autoregressive modelling and money-income causality detection," Journal of Monetary Economics, Elsevier, vol. 7(1), pages 85-106.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.