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More Evidence on the Money-Output Relationship

Author

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  • Hafer, R W
  • Kutan, A M

Abstract

Recent studies have found that money loses its explanatory power over output if the 1980s are included in the sample. Interest rates, not money, appear to predict output. Using annual data for 1915-93 and quarterly data for 1960-93, the authors demonstrate that the supposed breakdown in the money-output relationship stems from the type of stationary assumption imposed on the data. Assuming difference-stationary produces results found in the literature. Assuming trend-stationary produces results indicating that money and output remain statistically related. Moreover, the change in the stationarity assumption greatly affects the quantitative importance of interest rates in explaining output. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Hafer, R W & Kutan, A M, 1997. "More Evidence on the Money-Output Relationship," Economic Inquiry, Western Economic Association International, vol. 35(1), pages 48-58, January.
  • Handle: RePEc:oup:ecinqu:v:35:y:1997:i:1:p:48-58
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    Citations

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    Cited by:

    1. Jan Marc Berk, 2002. "Consumers' Inflation Expectations And Monetary Policy In Europe," Contemporary Economic Policy, Western Economic Association International, vol. 20(2), pages 122-132, April.
    2. Maral Kichian, 2012. "Financial Conditions and the Money-Output Relationship in Canada," Staff Working Papers 12-33, Bank of Canada.
    3. Stan Hurn & Peter C B Phillips & Shuping Shi, 2015. "Change Detection and the Casual Impact of the Yield Curve," NCER Working Paper Series 107, National Centre for Econometric Research.
    4. R. W. Hafer & Ali M. Kutan, 2002. "Detrending and the Money-Output Link: International Evidence," Southern Economic Journal, Southern Economic Association, vol. 69(1), pages 159-174, July.
    5. Brada, Josef C. & Kutan, Ali M., 1999. "The end of moderate inflation in three transition economies?," ZEI Working Papers B 21-1999, University of Bonn, ZEI - Center for European Integration Studies.
    6. Shuping Shi & Stan Hurn & Peter C B Phillips, 2016. "Causal Change Detection in Possibly Integrated Systems: Revisiting the Money-Income Relationship," NCER Working Paper Series 113, National Centre for Econometric Research.
    7. Dr.Godwin Chukwudum Nwaobi, 2004. "Money And Output Interraction In Nigeria," Macroeconomics 0405012, EconWPA.
    8. Joe Haslag & R.W. Hafer & Garett Jones, 2003. "The Effect of Monetary Policy on Economic Output," Working Papers 0311, Department of Economics, University of Missouri.
    9. Bernd Hayo, 1999. "Money-output Granger causality revisited: an empirical analysis of EU countries," Applied Economics, Taylor & Francis Journals, vol. 31(11), pages 1489-1501.
    10. Tracy Chan & Ramdane Djoudad & Jackson Loi, 2006. "Regime Shifts in the Indicator Properties of Narrow Money in Canada," Staff Working Papers 06-6, Bank of Canada.
    11. Ran, Jimmy & Voon, Jan P. & Li, Guangzhong, 2008. "Effects of foreign currency component in monetary aggregates on money neutrality," Economics Letters, Elsevier, vol. 99(3), pages 435-438, June.
    12. Jan Marc Berk & Gerbert Hebbink, 2006. "The anchoring of European inflation expectations," DNB Working Papers 116, Netherlands Central Bank, Research Department.
    13. Yannis Panagopoulos & Aristotelis Spiliotis, 2006. "Testing Money Supply Endogeneity: The Case of Greece (1975-1998)," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 85-102.
    14. William Gissy, 1999. "Net treasury borrowing and interest-rate changes," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 23(1), pages 23-29, March.
    15. William Gissy, 1999. "Treasury bill rates and treasury cash reserves," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 27(4), pages 435-443, December.
    16. R. W. Hafer, 2001. "What remains of monetarism?," Economic Review, Federal Reserve Bank of Atlanta, issue Q4, pages 13-33.
    17. Jiranyakul, Komain, 2007. "The Relation between Government Expenditures and Economic Growth in Thailand," MPRA Paper 46070, University Library of Munich, Germany.

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