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Detrending and the money-output link: International evidence

  • Hafer, R. W.
  • Kutan, Ali M.

An important policy question is whether nominal money is relatively more useful than interest rates in explaining movements in real output. Previous analyses usually rely only on U.S. data or other financially developed countries from a specific region, such as the EU. This study examines the empirical relation between money, interest rates, and output across a sample of 20 countries, including industrial countries from different regions as well as economically and financially less-developed countries. On the basis of estimating an unconstrained, four-variable VAR model, the weight of evidence indicates that rejecting money as a potentially informative tool in setting monetary policy is unwarranted.

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Paper provided by ZEI - Center for European Integration Studies, University of Bonn in its series ZEI Working Papers with number B 19-2001.

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Date of creation: 2001
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Handle: RePEc:zbw:zeiwps:b192001
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  1. 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.
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  8. Thoma, Mark A., 1994. "Subsample instability and asymmetries in money-income causality," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 279-306.
  9. 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.
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  16. Laurence H. Meyer, 2001. "Does money matter?," Review, Federal Reserve Bank of St. Louis, issue May, pages 1-16.
  17. 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.
  18. Ben Bernanke, 1990. "On the Predictive Power of Interest Rates and Interest Rate Spreads," NBER Working Papers 3486, National Bureau of Economic Research, Inc.
  19. Bernd Hayo, 1998. "Money-Output Granger Causality Revisited: An Empirical Analysis of EU Countries," Macroeconomics 9809009, EconWPA.
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