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Detrending and the Money‐Output Link: International Evidence
Author(s) -
Hafer R. W.,
Kutan Ali M.
Publication year - 2002
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.2002.tb00483.x
Subject(s) - economics , sample (material) , interest rate , monetary policy , variable (mathematics) , empirical evidence , econometrics , monetary economics , broad money , macroeconomics , mathematical analysis , philosophy , chemistry , mathematics , epistemology , chromatography
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.