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Detrending and the money-output link: International evidence

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  • Hafer, R. W.
  • Kutan, Ali M.

Abstract

An important policy question is whether nominal money is relatively more useful than interest rates in explaining movements in real output. Previous analyses usually rely only on U.S. data or other financially developed countries from a specific region, such as the EU. This study examines the empirical relation between money, interest rates, and output across a sample of 20 countries, including industrial countries from different regions as well as economically and financially less-developed countries. On the basis of estimating an unconstrained, four-variable VAR model, the weight of evidence indicates that rejecting money as a potentially informative tool in setting monetary policy is unwarranted.

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Bibliographic Info

Paper provided by ZEI - Center for European Integration Studies, University of Bonn in its series ZEI Working Papers with number B 19-2001.

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Date of creation: 2001
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Handle: RePEc:zbw:zeiwps:b192001

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  1. Thoma, Mark A., 1994. "Subsample instability and asymmetries in money-income causality," Journal of Econometrics, Elsevier, Elsevier, vol. 64(1-2), pages 279-306.
  2. Laurence H. Meyer, 2001. "Does money matter?," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue May, pages 1-16.
  3. von Hagen, Jurgen, 1999. "Money growth targeting by the Bundesbank," Journal of Monetary Economics, Elsevier, Elsevier, vol. 43(3), pages 681-701, June.
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  7. Canova, Fabio, 1998. "Detrending and business cycle facts," Journal of Monetary Economics, Elsevier, Elsevier, vol. 41(3), pages 475-512, May.
  8. Hafer, R W & Kutan, A M, 1997. "More Evidence on the Money-Output Relationship," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 35(1), pages 48-58, January.
  9. Swanson, Norman R., 1998. "Money and output viewed through a rolling window," Journal of Monetary Economics, Elsevier, Elsevier, vol. 41(3), pages 455-474, May.
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  11. Gerald P. Dwyer, Jr. & R.W. Hafer, 1999. "Are money growth and inflation still related?," Economic Review, Federal Reserve Bank of Atlanta, Federal Reserve Bank of Atlanta, issue Q2, pages 32-43.
  12. DeJong, David N. & Nankervis, John C. & Savin, N. E. & Whiteman, Charles H., 1992. "The power problems of unit root test in time series with autoregressive errors," Journal of Econometrics, Elsevier, Elsevier, vol. 53(1-3), pages 323-343.
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  16. Sims, Christopher A, 1980. "Comparison of Interwar and Postwar Business Cycles: Monetarism Reconsidered," American Economic Review, American Economic Association, American Economic Association, vol. 70(2), pages 250-57, May.
  17. Christiano, Lawrence J. & Ljungqvist, Lars, 1988. "Money does Granger-cause output in the bivariate money-output relation," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(2), pages 217-235, September.
  18. Stock, James H. & Watson, Mark W., 1989. "Interpreting the evidence on money-income causality," Journal of Econometrics, Elsevier, Elsevier, vol. 40(1), pages 161-181, January.
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Cited by:
  1. Simplice A. Asongu, 2014. "Correcting Inflation with Financial Dynamic Fundamentals: Which Adjustments Matter in Africa?," Journal of African Business, Taylor & Francis Journals, Taylor & Francis Journals, vol. 15(1), pages 64-73, April.
  2. Asongu Simplice, 2013. "Does Money Matter in Africa? New Empirics on Long- and Short-run Effects of Monetary Policy on Output and Prices," Working Papers 13/005, African Governance and Development Institute..
  3. Josef C. Brada & Ali M. Kutan, 1999. "The end of moderate inflation in three transition economies?," Working Papers, Federal Reserve Bank of St. Louis 1999-003, Federal Reserve Bank of St. Louis.
  4. Asongu, Simplice A, 2013. "How would monetary policy matter in the proposed African monetary unions? Evidence from output and prices," MPRA Paper 48496, University Library of Munich, Germany.
  5. Joe Haslag & R.W. Hafer & Garett Jones, 2003. "The Effect of Monetary Policy on Economic Output," Working Papers, Department of Economics, University of Missouri 0311, Department of Economics, University of Missouri.
  6. Asongu, Simplice A, 2013. "New Empirics of monetary policy dynamics: evidence from the CFA franc zones," MPRA Paper 48495, University Library of Munich, Germany.

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