Money does Granger-cause output in the bivariate money-output relation

Lawrence J. Christiano*, Lars Ljungqvist

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

85 Scopus citations

Abstract

A bivariate Granger-causality test on money and output finds statistically significant causality when data are measured in log levels, but not when they are measured in first differences of the logs. Bootstrap simulation experiments indicate that, most probably, the first difference results reflect lack of power, whereas the level results reflect Granger-causality that is actually in the data The reason for the lack of power in the first difference F-statistic is that first differencing the data appears to entail a specification error. By showing that money does Granger-cause output in the bivariate relation, we remove a potential embarrassment for models that assign an important role to money in business fluctuations.

Original languageEnglish (US)
Pages (from-to)217-235
Number of pages19
JournalJournal of Monetary Economics
Volume22
Issue number2
DOIs
StatePublished - Sep 1988

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Money does Granger-cause output in the bivariate money-output relation'. Together they form a unique fingerprint.

Cite this