Is the QTM Controversy Settled?

N R Bhanumurthy, M Ramachandran () and Purna Chandra Padhan
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Purna Chandra Padhan: University of Hyderabad

No 81, Working Papers from Institute for Social and Economic Change, Bangalore

Abstract: The present study tests the validity of the Quantity Theory of Money with the help of a new test procedure developed by Horvath & Watson (Econometric Theory, 1995) in a multiple cointegration framework. By using a fairly long quarterly data set of USA, Canada, Australia and Italy for the period 1975-I to 1998-II the study found that I(0) velocity is proved in all the sample countries, except Canada. Further, it found that all the sample countries have at least one unknown cointegrating vector between money supply, prices and real income, corroborating the propositions of QTM.

Keywords: Quantity theory of money; Multiple Cointegration (search for similar items in EconPapers)
JEL-codes: C32 E41 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2001
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