Testing the Friedman and Schwartz Hypothesis using Time Varying Correlation Analysis
Taniya Ghosh () and
Prashant Mehul Parab
MPRA Paper from University Library of Munich, Germany
The study analyses the time varying correlation of money and output using DCC GARCH model for Euro, India, Poland, the UK and the USA. In addition to simple sum money, the model uses Divisia monetary aggregate, theoretically shown as the actual measure of money. The inclusion of Divisia money restores the Friedman and Schwartz hypothesis that money is procyclical. Such procyclical nature of association was not robustly observed in the recent data when simple sum money was used.
Keywords: DCC GARCH; Divisia; Monetary Aggregates; Real Output (search for similar items in EconPapers)
JEL-codes: E3 E4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:90628
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