1. bookVolume 4 (2015): Issue 3 (September 2015)
Journal Details
License
Format
Journal
eISSN
2336-9205
First Published
11 Mar 2014
Publication timeframe
3 times per year
Languages
English
access type Open Access

Monetary Targeting

Published Online: 07 Oct 2015
Volume & Issue: Volume 4 (2015) - Issue 3 (September 2015)
Page range: 137 - 146
Received: 17 Apr 2015
Accepted: 06 May 2015
Journal Details
License
Format
Journal
eISSN
2336-9205
First Published
11 Mar 2014
Publication timeframe
3 times per year
Languages
English
Abstract

In this paper we test the existence of long-term relationship between money supply and inflation, money supply and GDP and money supply and unemployment. Three independent panel cointegration regressions are evaluated where money supply is the explanatory variable, while inflation, GDP and unemployment rates occur as dependent variables. The sample consists of 17 countries (Australia, Canada, Chile, Denmark, Israel, Japan, South Korea, Mexico, New Zealand, Poland, Switzerland, United Kingdom and United States). The data are annual and refer to the period from 1990 to 2013. The results of the empirical analysis in this paper show that there is no significant long-term relationship between inflation and money supply, while there is statistically significant long-term relationship between GDP and money supply, as well as between unemployment rates and the money supply.

Keywords

1. Andres, J., Lopez-Salido J.D. & J. Valles. (2006). Money in an Estimated Business Cycle Model of the Euro Area. The Economic Journal.10.1111/j.1468-0297.2006.01088.xSearch in Google Scholar

2. Clarida, R., Jordi, G. & M. Gertler (2000). Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory. Quarterly Journal of Economics 115.10.1162/003355300554692Search in Google Scholar

3. Fabris, N. (2006). Central Banking in Theory and Practice. Central Bank of Montenegro.Search in Google Scholar

4. Favara, G. & P. Giordani. (2009). Reconsidering the Role of Money for Output, Prices and Interest Rates. Journal of Monetary Economics.10.1016/j.jmoneco.2009.01.002Search in Google Scholar

5. Feldstein, M. and J. H. Stock. (1994). The Use of a Monetary Aggregate to Target Nominal GDP. NBER Working Paper Series.Search in Google Scholar

6. Hafer, R.W., Haslag, J.H. & G. Joseph. (2007). On Money and Output: Is Money Redundant? Journal of Monetary Economics.10.1016/j.jmoneco.2005.06.004Search in Google Scholar

7. Nelson, E. (2002). The Future of Monetary Aggregates in Monetary Policy Analysis. Monetary Policy Committee Unit, Bank of England10.1016/S0304-3932(03)00063-1Search in Google Scholar

8. Nelson, E. (2000). Direct Effects of Base Money on Aggregate Demand: Theory and Evidence. Bank of England Working Paper No. 122.10.2139/ssrn.245797Search in Google Scholar

9. Rudebusch, G. D. and L. E. O. Svensson. (1999). Eurosystem Monetary Targeting: Lessons from U.S. Data. Institute for International Economic Studies, Stockholm University.Search in Google Scholar

10. Stephen, E. & M. Kulish. (2010). Direct Effects Of Money On Aggregate Demand: Another Look At The Evidence. Reserve Bank of Australia.Search in Google Scholar

11. Svensson, L.E.O. (1999). Does the P* Model Provide Any Rationale For Monetary Targeting? Institute for International Economic Studies, Stockholm University.10.3386/w7178Search in Google Scholar

12. Svensson, L.E.O. (1999). How Should Monetary Policy Be Conducted in an Era of Price Stability? In New Challenges for Monetary Policy, A Symposium sponsored by the Federal Reserve Bank of Kansas City, Kansas City.10.3386/w7516Search in Google Scholar

13. Woodford, M. (1995). Price-level determinacy without control of a monetary aggregate. Carnegie-Rochester Conference Series on Public Policy, Vol. 43, pp. 1-46.10.3386/w5204Search in Google Scholar

Recommended articles from Trend MD

Plan your remote conference with Sciendo