Abstract
While empirical evidence on the relationship between money and income has mainly been presented using seasonally adjusted data, seasonally unadjusted data are used in this paper to examine the time series behaviour of money, real GNP and industrial production, at both the seasonal and zero frequencies, based on tests of cointegration and seasonal cointegration. Two important conclusions are reached in the paper. First, although the univariate time series properties of M1 and real GNP appear to be very similar at both the seasonal and zero frequencies, seasonal comovements of M1 and real GNP turn out to be different from long-run comovements. Second, when seasonally unadjusted data are used, there appears to be no long-run relationship between money (M1 or M2) and output in the sense that the null of no cointegration cannot be rejected. Moreover, there is evidence of some feedback from output to money so that money is not necessarily exogenous. Consequently, as we might lose a possibly important chain of causation from money to income by ignoring the information concerning seasonal fluctuations, this paper provides further evidence that researchers should use raw data instead of seasonally adjusted data for inference and forecasting purposes.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.