Causal Nexus between Inflation and Economic Growth of Japan

Shailender Singh and Amar Singh ()
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Shailender Singh: Department of International Finance, I-Shou University, Taiwan.
Amar Singh: Department of Commerce, GraphicEra Hill University, Uttarakhand, India.

Iranian Economic Review (IER), 2015, vol. 19, issue 3, 265-278

Abstract: This study aims to evaluate the link between economic growth and consumer price index (CPI) in Japan for the period of 1980-2014. Initial series were adjusted for stationarity using the Augmented Dickey- Fuller (ADF) test for unit root followed by the application of Johansen Co-integration Test in order to examine the long-run relationship among the variables, while the causalities were evaluated using Granger Causality model. The empirical results reveal that economic growth and CPI are co-integrated and thus exhibit a long-run relationship between the variables. The Granger causality test supports bi-directional causality between economic growth and CPI in Japan. The paper adopts a time series framework of the Vector Error Correlation Models (VECM) to study the dynamic relationship between economic growth and consumer price index for Japan.

Keywords: Co-integration; Consumer Price Index; Economic Growth; Granger Causality Test; Inflation; Vector Error Correction. (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eut:journl:v:19:y:2015:i:3:p:265

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