Do Money, Prices, Incomes and Interest Rates Interrelate in the U.S.? A Fractional Cointegrated VAR Approach

The Empirical Economics Letters, 12(8): (August 2013) ISSN 1681 8997

Posted: 23 Oct 2013

See all articles by Dimitrios I. Dimitriou

Dimitrios I. Dimitriou

University of Ioannina - Department of Economics; National and Kapodistrian University of Athens

Date Written: August 22, 2013

Abstract

The paper addresses the empirical application of cointegration analysis to four important macroeconomic variables: narrow money (M1), incomes, prices and interest rates in the U.S. during the turmoil period of last decade. Unit root and longmemory tests support the appropriateness of the Fractionally Cointegrated VAR model to take account the long-memory behaviour. Results conclude that a long-run relationship between these macroeconomic variables exists. This suggests a sufficiently stable monetary policy taken by U.S. government and the FED.

Keywords: Fractional Cointegrated VAR; Monetary Policy; Financial Crises; U.S. Analysis

JEL Classification: C5, E1, E4

Suggested Citation

Dimitriou, Dimitrios I. and Dimitriou, Dimitrios I., Do Money, Prices, Incomes and Interest Rates Interrelate in the U.S.? A Fractional Cointegrated VAR Approach (August 22, 2013). The Empirical Economics Letters, 12(8): (August 2013) ISSN 1681 8997, Available at SSRN: https://ssrn.com/abstract=2343733

Dimitrios I. Dimitriou (Contact Author)

National and Kapodistrian University of Athens ( email )

Department of Economics
Athens
Greece

University of Ioannina - Department of Economics ( email )

45110 Ioannina
Greece

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