FINDING THE RIGHT NOMINAL ANCHOR: THE COINTEGRATION OF MONEY, CREDIT AND NOMINAL INCOME IN NORWAY

Gunnar Bårdsen and Jan Tore Klovland

No 268385, Economic Research Papers from University of Warwick - Department of Economics

Abstract: Using cointegration techniques this paper presents an empirical analysis of the relationship between nominal GDP or domestic expenditure on the one hand and money and credit variables on the other. The main findings are: (1) In the period from 1966 to 1983 there is a relatively firm relationship between the nominal income variables and credit, which subsequentl breaks down completely during the ensuing period of credit market deregulation; (2~ Nominal income and the broad money stock, M2, are cointegrated throughout the period 1966 to 1989 within a model augmented by the own rate of interest on M2 and a bond yield. Thus M2, adjusted for the effects of interest rates affecting the demand for money, seems to provide the most reliable long—run anchor for nominal income in Norway in the period considered here.

Keywords: Financial Economics; Research Methods/ Statistical Methods (search for similar items in EconPapers)
Pages: 47
Date: 1990-05-05
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Finding the Right Nominal Anchor: The Cointegration of Money, Credit and Nominal Income in Norway (1990)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:268385

DOI: 10.22004/ag.econ.268385

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