Interpreting Evidence on Money-Income Causality / James H. Stock, Mark W. Watson.

Format:

Book

Author/Creator:

Stock, James H.

Contributor:

National Bureau of Economic Research.

Watson, Mark W.

Series:

Working Paper Series (National Bureau of Economic Research) no. w2228.

NBER working paper series no. w2228

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1987.

Summary:

Previous authors have reached puzzlingly different conclusions about the usefulness of money for forecasting real output based on closely related regression-based tests. An examination of this and additional new evidence reveals that innovations in M1 have statistically significant marginal predictive value for industrial production, both in a bivariate model and in a multivariate setting including a price index and an interest rate. This conclusion follows from focusing on the trend properties of the data, both stochastic and deterministic, and from drawing inferences using asymptotic theory that explicitly addresses the implications of these trends for the distributions of the various test statistics.

Notes:

Print version record

April 1987.