Money-output Granger causality revisited: an empirical analysis of EU countries
In this paper, the evidence collected in the large literature on testing for Granger-causality from money to output is revisited. Using a broad data base of 14 EU countries plus Canada, the US and Japan, and quarterly data from the mid 1960s to mid 1990s, a number of hypotheses from this literature is evaluated. It is found that very few general conclusions can be sustained. For instance, in most countries it is not the case that the use of data in levels creates a bias in favour of finding Granger-causality effects of money on output compared to using differences. Neither does the significance of money lags decline when increasing the number of variables included in the model. What appears to be robust, though, is that allowing for asymmetries clearly increases the likelihood of finding significant causality effects. Based on the Granger-causality test results, a number of country groups are obtained using cluster analysis, which are characterized by a similarly behaviour with respect to the money-output relation.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 31 (1999)
Issue (Month): 11 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEC20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEC20|
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.:
- Krol, Robert & Ohanian, Lee E., 1990. "The impact of stochastic and deterministic trends on money-output causality : A multi-country investigation," Journal of Econometrics, Elsevier, vol. 45(3), pages 291-308.
- Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-52, September.
- Stock, James H. & Watson, Mark W., 1989. "Interpreting the evidence on money-income causality," Journal of Econometrics, Elsevier, vol. 40(1), pages 161-181, January.
- King, Robert G & Plosser, Charles I, 1984. "Money, Credit, and Prices in a Real Business Cycle," American Economic Review, American Economic Association, vol. 74(3), pages 363-80, June.
- Lawrence J. Christiano & Lars Ljungqvist, 1987. "Money does Granger-cause output in the bivariate output-money relation," Staff Report 108, Federal Reserve Bank of Minneapolis.
- Chow, Gregory C & Lin, An-loh, 1971.
"Best Linear Unbiased Interpolation, Distribution, and Extrapolation of Time Series by Related Series,"
The Review of Economics and Statistics,
MIT Press, vol. 53(4), pages 372-75, November.
- Tom Doan, . "CHOWLIN: RATS procedure to distribute a series to a higher frequency using related series," Statistical Software Components RTS00036, Boston College Department of Economics.
- Tom Doan, . "DISAGGREGATE: RATS procedure to implement general disaggregation (interpolation/distribution) procedure," Statistical Software Components RTS00050, Boston College Department of Economics.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
- Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-72, August.
- Christiano, Lawrence J. & Ljungqvist, Lars, 1988. "Money does Granger-cause output in the bivariate money-output relation," Journal of Monetary Economics, Elsevier, vol. 22(2), pages 217-235, September.
- Thoma, Mark A., 1994. "Subsample instability and asymmetries in money-income causality," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 279-306.
- Sims, Christopher A, 1980.
"Comparison of Interwar and Postwar Business Cycles: Monetarism Reconsidered,"
American Economic Review,
American Economic Association, vol. 70(2), pages 250-57, May.
- Christopher A. Sims, 1980. "Comparison of Interwar and Postwar Business Cycles: Monetarism Reconsidered," NBER Working Papers 0430, National Bureau of Economic Research, Inc.
- Deirdre N. McCloskey & Stephen T. Ziliak, 1996. "The Standard Error of Regressions," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 97-114, March.
- Thornton, Daniel L & Batten, Dallas S, 1985. "Lag-Length Selection and Tests of Granger Causality between Money and Income," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(2), pages 164-78, May.
- 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.
- Hendry, David F, 1980. "Econometrics-Alchemy or Science?," Economica, London School of Economics and Political Science, vol. 47(188), pages 387-406, November.
- James H. Stock & Mark W. Watson, 1987. "Interpreting Evidence on Money-Income Causality," NBER Working Papers 2228, National Bureau of Economic Research, Inc.
- Davis, Mark S. & Tanner, J. Ernest, 1997. "Money and economic activity revisited," Journal of International Money and Finance, Elsevier, vol. 16(6), pages 955-968, December.
When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:31:y:1999:i:11:p:1489-1501. 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: (Michael McNulty)
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.