Causality in the United Kingdom: Results from an Open Economy
This study examines money-income causality in the United Kingdom. Unlike most previous studies, this study finds unidirectional causality running from U.K. M1 to U.K. income. Furthermore, U.S. M1 is found to cause U.K. M1 only weakly and does not cause U.K. income. These findings are inconsistent with the view that the United Kingdom functions as a small, open economy. The standard result is that movements in the money supply of the reserve currency country, the United States, leads to movements in the money supply and nominal income of other countries, while the domestic money supply has no impact on domestic income.
Volume (Year): 17 (1991)
Issue (Month): 4 (Oct-Dec)
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