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A direct test of the endogeneity of money: implications for Gulf Cooperation Council (GCC) countries

  • Bedri Kamil Onur Tas

    (TOBB ETU)

  • Selahattin Togay

    (Gazi University)

This paper contributes to the ongoing discussion about the endogeneity of money supply by empirically investigating the GCC countries. We propose and implement a direct test of money supply endogeneity that depends on econometric specification of exogeneity. To be able to make comparisons with previous studies in the literature, we also conducted Granger Causality tests to analyze the causality relationship between bank credit and money supply. Both of the empirical studies provide empirical evidence for the endogeneity of money supply in GCC countries. The results of the paper have many significant monetary policy implications for the upcoming monetary unification of the GCC countries.

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Paper provided by Turkish Economic Association in its series Working Papers with number 2010/5.

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Length: 38 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:tek:wpaper:2010/5
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  1. Howells, Peter & Hussein, Khaled, 1998. "The Endogeneity of Money: Evidence from the G7," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(3), pages 329-40, August.
  2. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2007. "Enhanced routines for instrumental variables/GMM estimation and testing," CERT Discussion Papers 0706, Centre for Economic Reform and Transformation, Heriot Watt University.
  3. Giuseppe Fontana, 2003. "Post Keynesian Approaches to Endogenous Money: A time framework explanation," Review of Political Economy, Taylor & Francis Journals, vol. 15(3), pages 291-314.
  4. Alfonso Palacio Vera, 2001. "The Endogenous Money Hypothesis: Some Evidence from Spain (1987-1998)," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 23(3), pages 509-526, April.
  5. Shirley J. Gedeon, 2009. "Money supply endogeneity under a currency board regime: the case of Bosnia and Herzegovina," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 32(1), pages 97-114, September.
  6. Shafik Hebous, 2006. "On the Monetary Union of the Gulf States," Kiel Advanced Studies Working Papers 431, Kiel Institute for the World Economy.
  7. Robert Pollin, 1991. "Two Theories of Money Supply Endogeneity: Some Empirical Evidence," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 13(3), pages 366-396, April.
  8. Perron, Pierre, 1988. "Trends and random walks in macroeconomic time series : Further evidence from a new approach," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 297-332.
  9. Yannis Panagopoulos & Aristotelis Spiliotis, 2008. "Alternative money theories: a G7 testing," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 30(4), pages 601-622, July.
  10. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  11. Mervyn King, 1994. "Monetary policy in the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 15(3), pages 109-28, August.
  12. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, March.
  13. Bala Shanmugam & Mahendhiran Nair & Ong Wee Li, 2003. "The endogenous money hypothesis: empirical evidence from Malaysia (1985-2000)," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 25(4), pages 599-611, July.
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