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The choice of appropriate monetary aggregates in the United Kingdom

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  • Mohammad Hasan

Abstract

This paper re-examines the relationship between alternative monetary aggregates (M0 and M4) and other macroeconomic variables in the United Kingdom. The results of a five-variable VAR analysis are indicative of bidirectional causality between each of the monetary aggregates and real output. Our findings of a feedback relationship between M0-real income, and M4-real income makes each of the monetary aggregates a poor intermediate target variable. Moreover, contrary to most research work in this area, we find a feedback relationship between M0 and prices which appears to support the monetary accomodation hypothesis.

Suggested Citation

  • Mohammad Hasan, 1998. "The choice of appropriate monetary aggregates in the United Kingdom," Applied Economics Letters, Taylor & Francis Journals, vol. 5(9), pages 563-568.
    • Handle: RePEc:taf:apeclt:v:5:y:1998:i:9:p:563-568
    DOI: 10.1080/758529500
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    References listed on IDEAS

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    1. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Paper 1227, Economics Department, Queen's University.
    2. Breedon, F J & Fisher, P G, 1996. "M0: Causes and Consequences," The Manchester School of Economic & Social Studies, University of Manchester, vol. 64(4), pages 371-387, December.
    3. Paul Fisher & Juna Vega, 1993. "An Empirical Analysis of M4 in the United Kingdom," Bank of England working papers 21, Bank of England.
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