Causality between Money and Prices: Evidence from Pakistan
The relationship between money and prices has been a debated issue among economic schools of thought particularly between the Monetarists and the Keynesians. The monetarists claim that changes in money stocks cause changes in price levels. In other words, the direction of causation runs from money to prices implying that prices can be controlled through money supply. The keynesians, on the other hand, argue that money is important but is not responsible for changes in price levels. Instead, structural factors play important role suggesting that money supply is not an effective instrument to control price changes. The causal relationship between money and prices has been extensively tested in various countries. For example, Brillembourg and Khan (1979) examined this relationship in USA. Using Sims procedure for the period 1870–1975, they found unidirectional causality running from money to prices. Similar directions of causation are reported by Lee and Li (1983) and Ramachandran and Kamaiah (1992) who investigated the causal relationship in Singapore and India respectively. On the other hand, Aghevli and Khan (1978), while investigating the causal relationship in Brazil, Columbia, the Dominican Republic, and Thailand, found bidirectional causality between money and prices in these countries.
Volume (Year): 37 (1998)
Issue (Month): 4 ()
|Contact details of provider:|| Postal: |
Web page: http://www.pide.org.pk
More information through EDIRC
References listed on IDEAS
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.:
- Engle, Robert F & Granger, Clive W J, 1987.
"Co-integration and Error Correction: Representation, Estimation, and Testing,"
Econometric Society, vol. 55(2), pages 251-76, March.
- Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Bijan B. Aghevli & Mohsin S. Khan, 1978. "Government Deficits and the Inflationary Process in Developing Countries (DÃ©ficits publics et processus inflationniste dans les pays en dÃ©veloppement) (Los dÃ©ficit pÃºblicos y el proceso inflaciona," IMF Staff Papers, Palgrave Macmillan, vol. 25(3), pages 383-416, September.
When requesting a correction, please mention this item's handle: RePEc:pid:journl:v:37:y:1998:i:4:p:1155-1161. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Khurram Iqbal)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.