Breaking trends and the money-output correlation
This paper examines the impact on the money-output correlation of a univariate specification that allows time series to be characterized as stationary around a broken trend function. Though pretesting suggests that U.S. real output (industrial production) can be described as broken-trend stationary,...
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| Format: | text |
| Language: | English |
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Institutional Knowledge at Singapore Management University
1997
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| Online Access: | https://ink.library.smu.edu.sg/lkcsb_research/6895 https://ink.library.smu.edu.sg/context/lkcsb_research/article/7894/viewcontent/003465397557097.pdf |
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| Institution: | Singapore Management University |
| Language: | English |
| Summary: | This paper examines the impact on the money-output correlation of a univariate specification that allows time series to be characterized as stationary around a broken trend function. Though pretesting suggests that U.S. real output (industrial production) can be described as broken-trend stationary, this result has only limited impact on the money-output correlation. Before 1985 there is a strong Granger causal relationship between money and broken-detrended output (hut not first-differenced output), even when different short-term interest rates are used as regressors. However, after 1985 this relationship weakens significantly, whether or not one determines that output has a unit root. |
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