Levent, Korap (2009): The search for cointegration between money, prices and income: low frequency evidence from the Turkish economy. Published in: panoeconomicus , Vol. LVI, No. 1 (2009): pp. 5572.

PDF
MPRA_paper_19557.pdf Download (157Kb)  Preview 
Abstract
In this paper, we aim to test the empirical validity of the QTM relationship for the Turkish economy. Using some contemporaneous time series estimation techniques, our estimation results reveal that stationarity characteristics of the velocities of currency in circulation and the broad money aggregate in the economy cannot be rejected through a quantity theoretical cointegrating longterm variable space. We find that there exists an about onetoone proportionality between money and prices and money and real income, and that the exogeneity of money cannot be rejected for the currency in circulation in the economy. But, the exception here comes from the broad monetary aggregate used in the QTM equation such that money seems to be endogenous as for the longterm variable space.
Item Type:  MPRA Paper 

Original Title:  The search for cointegration between money, prices and income: low frequency evidence from the Turkish economy 
English Title:  The search for cointegration between money, prices and income: low frequency evidence from the Turkish economy 
Language:  English 
Keywords:  Money ; Prices ; Income ; Quantity Theory of Money ; Cointegration ; Longspan Data ; Turkish Data ; 
Subjects:  C  Mathematical and Quantitative Methods > C3  Multiple or Simultaneous Equation Models; Multiple Variables > C32  TimeSeries Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models E  Macroeconomics and Monetary Economics > E5  Monetary Policy, Central Banking, and the Supply of Money and Credit > E51  Money Supply; Credit; Money Multipliers E  Macroeconomics and Monetary Economics > E5  Monetary Policy, Central Banking, and the Supply of Money and Credit > E52  Monetary Policy E  Macroeconomics and Monetary Economics > E6  Macroeconomic Policy, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E61  Policy Objectives; Policy Designs and Consistency; Policy Coordination 
Item ID:  19557 
Depositing User:  Levent Korap 
Date Deposited:  25. Dec 2009 08:42 
Last Modified:  14. Feb 2013 08:20 
References:  Aslan, O. and L. Korap. 2007. “Testing Quantity Theory of Money for the Turkish Economy.” Journal of BRSA Banking and Financial Markets, 1(2): 93109. Bullard, J. 1999. “Testing LongRun Monetary Neutrality Propositions: Lessons from the Recent Research.” FRB of St. Louis Review, November/December, 5777. Dickey, D.A. and W.A. Fuller. 1981. “Likelihood Ratio Statistics for Autoregressive Time Series with Unit Roots.” Econometrica, 49: 1057072. Dwyer, G.P. and R.W. Hafer. 1999. “Are Money Growth and Inflation Still Related?.” FRB of Atlanta Economic Review, Second Quarter, 3243. Engle, R.F. and C.W.J. Granger. 1987. “Cointegration and Error Correction: Representation, Estimation, and Testing.” Econometrica, 55: 25176. Fisher, M.E. and J.J. Seater. 1993. “LongRun Neutrality and Superneutrality in an ARIMA Framework.” American Economic Review, June, 83: 40215. Friedman, M. 1956. “The Quantity Theory of Money – A Restatement.” In Studies in the Quantity Theory of Money, ed. M. Friedman, 321. Chicago: The University of Chicago Press. Gonzalo, J. 1994. “Five Alternative Methods of Estimating Longrun Equilibrium Relationships.” Journal of Econometrics, 60: 20333. Granger, C.W.J. and P. Newbold. 1974. “Spurious Regressions in Economic.” Journal of Econometrics, 2(2): 11120. Grauwe, P.D. and M. Polan. 2005. “Is Inflation Always and Everywhere a Monetary Phenomenon?.” Scand. J. of Economics, 107(2): 23959. Harris, R.I.D and Sollis, R. 2003. Applied Time Series Modelling and Forecasting. Wiley. Herwartz, H. and H.E. Reimers. 2006. “LongRun Links among Money, Prices and Output: Worldwide Evidence.” German Economic Review, 7: 6586. Hume, D. 1970. “Of Money.” In Writings on Economics, ed. E. Rotwein, University of Wisconsin Press. Reprinted in selected essays from Political Discourses, 1752. Johansen, S. 1988. “Statistical Analysis of Cointegration Vectors.” Journal of Economic Dynamics and Control, 12: 23154. Johansen, S. 1992. “Testing for Weak Exogeneity and the Order of Cointegration in the U.K. Money Demand Data.” Journal of Policy Modeling, 14: 31334. Johansen, S. and K. Juselius. 1990. “Maximum Likelihood Estimation and Inference on Cointegration with Applications to the Demand for Money.” Oxford Bulletin of Economics and Statistics, 52: 169210. Johansen, S., Mosconi, R. and Nielsen, B. 2000. “Cointegration Analysis in the Presence of Structural Breaks in the Deterministic Trend.” Econometrics Journal, 3: 21649. Karfakis, C. 2002. “Testing the Quantity Theory of Money in Greece.” Applied Economics, 34: 58387. Karfakis, C. 2004. “Testing the Quantity Theory of Money in Greece: Reply to Ozmen.” Applied Economics Letters, 11: 54143. King, R.G. and M.W. Watson. 1997. “Testing LongRun Neutrality.” FRB of Richmond Economic Quarterly, 83(3): 69101. Lucas, R.E., Jr. 1980. “Two Illustrations of the Quantity Theory of Money.” American Economic Review, 70(5): 1005014. MacKinnon, J.G. (1996). “Numerical Distribution Functions for Unit Root and Cointegration Tests.” Journal of Applied Econometrics, 11: 60118. Mishkin, F.S. 1997. The Economics of Money, Banking and Financial Markets. 5. Ed., AddisonWesley. OsterwaldLenum, M. 1992. “A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics.” Oxford Bulletin of Economics and Statistics, 54: 46172. Ozmen, E. 2003. “Testing the Quantity Theory of Money in Greece.” Applied Economics Letters, 10: 97174. Perron, P. 1989. “The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis.” Econometrica, 57: 1361401. Pigou, A.C. 1917. “The Value of Money.” Quarterly Journal of Economics, 32: 3865. Said, S.E. ve Dickey, D.A. 1984. “Testing for Unit Roots in Autoregressive Moving Average Models of Unknown Order.” Biometrika, 71: 599607. Serletis, A. and Z. Koustas. 1998. “International Evidence on the Neutrality of Money.” Journal of Money, Credit, and Banking, 30(1): 125. Serletis, A. and D. Krause. 1996. “Empirical Evidence on the LongRun Neutrality Hypothesis Using LowFrequency International Data.” Economics Letters, 50: 32327. Turkish Statistical Institute. 2008. Statistical Indicators 19232007. Ankara, Turkey. Zivot, E. and Andrews, D.W.K. 1992. “Further Evidence of Great Crash, the Oil Price Shock and the Unit Root Hypothesis.” Journal of Business and Economic Statistics, 10: 25170. 
URI:  http://mpra.ub.unimuenchen.de/id/eprint/19557 