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Testing for nonlinear causation between capital inflows and domestic prices

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  • Rashid, Abdul

Abstract

The nonlinear cointegration and Granger causality tests are applied in a bi-variate framework to investigate the effects of capital inflows, monetary expansion and interest rates on domestic price levels. The key message of the analysis is that there is a significant inflationary impact of capital inflows, money supply-to-GDP ratio and domestic debt, in particular during period of large capital inflows from 2001 to 2008. Whereas, interest rate and exchange rate do not have any significant nonlinear causal links with domestic price levels during the examined periods.

Suggested Citation

  • Rashid, Abdul, 2010. "Testing for nonlinear causation between capital inflows and domestic prices," MPRA Paper 26082, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:26082
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    File URL: https://mpra.ub.uni-muenchen.de/26082/1/MPRA_paper_26082.pdf
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    References listed on IDEAS

    as
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    4. Rangan Gupta, 2005. "Financial Liberalization and Inflationary Dynamics," Working papers 2005-31, University of Connecticut, Department of Economics.
    5. Kyrtsou, Catherine & Labys, Walter C., 2006. "Evidence for chaotic dependence between US inflation and commodity prices," Journal of Macroeconomics, Elsevier, vol. 28(1), pages 256-266, March.
    6. Dimitrios Hristu-Varsakelis & Catherine Kyrtsou, 2010. "Testing for Granger Causality in the Presence of Chaotic Dynamics," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 53(2), pages 323-327.
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    More about this item

    Keywords

    Capital Inflows; Inflationary Pressures; Monetary Expansion; Nonlinear Dynamics;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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