The Correlation between Shocks to Output and the Price Level: Evidence from a Multivariate GARCH Model

Previous research indicates that the price-output correlation is time varying. This paper therefore estimates a vector autoregression (VAR) model with a bivariate generalized autoregressive conditional heteroskedasticity (GARCH) error process to obtain quarterly estimates of the price-output correlation for the United States for the period 1876:IV-1999:IV. The estimated correlation is usually positive before 1945 and zero during 1945-1963. Negative correlations become important only after 1963 but do not become obviously more important than zero correlations. Prior to 1945, the estimated correlation typically is positive during both recessions and expansions. After 1945, the estimated correlation remains largely positive during recessions but becomes mainly negative during expansions, suggesting that changes in the sign of the price-output correlation are the result primarily of changes in its sign during expansions.     

Money Growth,Output Growth,and Inflation: Estimation of a Modern Quantity Theory

This paper develops a long-run version of the quantity theory of money growth, real GDP growth, and inflation. Inflation rates, averaged for the years 1980-1993, are computed for 81 countries. These cross-section inflation rates are explained almost entirely by average M2 growth rates. In countries marked by high money growth and inflation, the estimated coefficients of M2 growth are strikingly close to one, strongly confirming the quantity theory. By contrast, in countries with relatively low money growth and inflation, the estimated money growth coefficient is only 0.69; the quantity theory offers a less complete explanation of inflation. Money growth and GDP growth are nearly orthogonal, consistent with long-run monetary superneutrality. The quantity theory is a reliable model of inflation for most countries, but not for those experiencing slow long-run money growth.     

Income Inequality,Human Capital,and Income Growth: Evidence from a State-Level VAR Analysis

We use Granger causality and impulse response analysis to examine the relationship between income inequality, human capital attainment, and income growth using annual state-level data over the period 1929–2000. We find consistent evidence that the income share of the top decile Granger-causes income growth, but only weak evidence that income growth Granger-causes the top decile income share. Moreover, an impulse response analysis indicates that income growth responds negatively to permanent changes in the income share of the top decile. These findings appear to have important regional variations, however, with the more densely populated Eastern states showing the strongest associations. We also find evidence that years of schooling may Granger-cause income levels, but little evidence that years of schooling Granger-causes the top decile income share.

The effectiveness of monetary policy in China: Evidence from a Qual VAR

Analyzing monetary policy in China is not straightforward because the People's Bank of China (PBoC) implements policy by using more than one instrument. In this paper we use a Qual VAR, a conventional VAR system augmented with binary policy announcements, to extract a latent indicator of tightening and easing pressure, respectively, for China. The model acknowledges that policy announcements are endogenous and summarizes policy by a single indicator. The Qual VAR allows us to study the impact of monetary policy in terms of unexpected changes in these latent variables, which we identify using sign restrictions. We show that the transmission of monetary policy impulses to the rest of the economy is similar to the transmission process in advanced economies in terms of both output growth and inflation despite a very different monetary policy framework. We find that bank loans are not sensitive to policy changes, which implies that window guidance is still a necessary policy tool. We also find that the impact of monetary policy shocks is asymmetric in terms of asset prices, that is, the asset price reactions differ in their sensitivity to tightening shocks and easing shocks, respectively. In particular, an easing of monetary conditions boosts stock prices while a tightening shock leaves stock prices unaffected. This shows that monetary policy is not a suitable tool to stabilize asset prices, which raises implications for financial stability and macroprudential policy.     

Evidence on the Effects of Money Growth on Inflation with Regime Switching

Since the latter half of 2010, a new round of inflation has gradually been manifesting in China. The debate regarding whether excess money supply is responsible for this inflation has attracted scholars to investigate the effects of money growth on inflation. In this paper, we use correlation analysis to confirm the comovement between growth of monetary aggregates and inflation. We explore the asymmetric effects of monetary policy on inflation using the Markov regime‐switching model. The empirical results show that monetary policy can be more effective in curbing inflation in a high inflation state than in boosting the price level in a low inflation state. However, simply tightening the money supply might not be sufficient to suppress the price level. To this end, the Chinese Government should adopt other policies, such as supply stabilization policies, to help suppress the price level. Our study can help policy‐makers to determine the actual economic state and provides some policy implications for the current inflation.     

我国有效税率结构的经济增长效应：基于SVAR模型的实证研究

通过测算我国劳动、资本和消费的有效税率,以反映我国劳动收入、资本收入和消费支出的真实税收负担情况,并在此基础上构建SVAR模型来考察有效税率结构冲击对经济增长的动态影响。结果表明：消费支出有效税率和劳动收入有效税率的提高有利于投资率和经济增长率的提高,长期累积效应为正;对资本收入征税,无论在短期还是长期都不利于投资率和经济增长率的提高,长期累积效应为负。研究我国有效税率结构的经济增长动态增长效应,对政府税收政策的制定和实施时机的选择有一定的参考意义。     

The Impact of Inflation Uncertainty on Output Growth and Inflation in Thailand*

We explore the impact of inflation uncertainty on output growth in Thailand, an emerging market economy with moderate inflation. Inflation and output uncertainty are modeled in a bivariate constant conditional correlation generalized autoregressive conditional heteroskedastic (AR(p)‐cccGARCH(1,1)) specification. We include the exchange rate in the mean equations, and use the headline and core inflation rates and industrial production to generate inflation and output uncertainty series. These series are then used in Granger causality tests to make inferences about the effect of monetary policy‐induced inflation uncertainty. Causality tests show a positive relation from inflation to inflation uncertainty. Additionally, increased inflation uncertainty decreases output. These results are consistent with real costs associated with moderate inflation. Finally, we find no evidence that monetary policy reduced these costs.     

Money Growth,Output Growth,and Inflation: A Reexamination of the Modern Quantity Theory's Linchpin Prediction

A testable implication of the modern quantity theory of money, when viewed as a theory of inflation, is the joint hypothesis that (i) there is a one-to-one positive relationship between inflation and the money stock growth rate, (ii) there is a one-to-one negative relationship between inflation and the aggregate output growth rate, and (iii) there are no other determinants of inflation besides the money stock and aggregate output expansion rates. This implication is the theory's linchpin prediction. A recent prior study published in this journal examines cross-country data and reports that this hypothesis cannot be rejected. The present study reexamines the prior study's data and finds that the joint hypothesis is decisively rejected, an unpleasant finding from a monetarist perspective. The article then goes on to propose an alternative to the prior study's model of the inflation process and reports findings that are, from the perspective of a monetarist, at least mildly pleasant.     

External shocks and Japanese business cycles: Evidence from a sign-restricted VAR model

This study investigates the sources of Japanese business fluctuations since the 1990s, taking into account both external shocks (e.g., risk premium and foreign demand shocks) and domestic supply and demand shocks. We use the sign-restricted VAR model based on the theoretical model to identify these shocks. The presented results show that approximately 30–50% of the forecast error variances in output can be explained by external shocks. Further, we demonstrate that supply shock is the main influencing factor in Japanese business fluctuations throughout the sample period and that the role of external shocks has been growing in the post-Lehman period, including the effect of the Great East Japan Earthquake.     

通货膨胀、通货膨胀不确定性与中国实际产出增长

基于中国1993年1月至2010年12月的月度数据,本文采用双变量GARCH模型测量了中国通货膨胀不确定性,并借助于传统的Granger因果检验以及基于马尔科夫区制转移向量自回归(MS-VAR)模型下Granger因果检验等方法对通货膨胀、通货膨胀不确定性与中国实际产出增长进行了实证研究.本文研究发现:中国通货膨胀和通货膨胀不确定性之间存在着Granger意义上的双向因果性,在作用机制上支持了Okun-Friedman理论假说以及Holland论断;传统的Granger因果检验表明中国通货膨胀、通货膨胀不确定性对中国实际产出增长之间存在Granger意义上的因果性,但是基于MS-VAR模型的Granger因果检验研究则表明上述因果性仅存在于特定的机制下.     

Trans-Tasman Transmission of Monetary Shocks: Evidence From a VAR Approach

This paper investigates the cross-country transmission mechanisms of monetary shocks between Australia and New Zealand within a VAR framework for the period 1985:1–2003:4. The empirical results indicate that a monetary shock in either Australia or New Zealand has real effects in the short-run in both countries however, an Australian shock generates more significant responses of most variables. Australian output is found to be significantly more sensitive than New Zealand output to monetary innovations in either country. The results also suggest that monetary innovations in a small open economy can also influence its larger trading partner.The authors would like to thank Faik Koray and an anonymous referee for their valuable comments. The usual disclaimer applies.     

Growth Effects of Economic Integration: Evidence from the EU Member States

After compiling an index of economic integration that accounts for global (GATT) as well as regional (European) integration of the EU member states we test for permanent and temporary growth effects in a growth accounting framework, using a panel of fifteen EU member states over the period 1950–2000. While the hypothesis of permanent growth effects is rejected, the results—though not completely robust to controlling for time-specific effects—suggest sizeable level effects: GDP per capita of the EU would be approximately one-fifth lower today if no integration had taken place since 1950. JEL no. C33, F15, F43, O52     

The Synergistic Effects Between Insurance and Credit Markets on Economic Growth: Evidence from China

Insurance and credit markets share some common roles in stimulating economic growth, whether they are complementary or not is worth researching further. Based on the generalized method of moments, this paper investigates the synergistic effects between insurance and credit markets on economic growth in Chinese different regions using an interaction term in the regression model. Moreover, to understand the different economic roles of life and nonlife insurance sectors, we include them into estimation model as well. The results indicate that total insurance and credit markets are substituted, life insurance and credit markets are substituted, and nonlife insurance and credit markets are complementary in the whole region. Specifically, the synergistic effects between insurance and credit markets on economic growth vary considerably across different regions. These findings offer several useful insights for policy-makers.     

The Effects of Expected and Unexpected Volatility on Long-Run Growth: Evidence from 18 Developed Economies

This article examines the relationship between output volatility and long-run growth for 18 developed countries between 1880 and 1990. The analysis builds on the existing literature by decomposing output growth volatility into expected and unexpected components and then examining whether the types of volatility have different effects on long-run growth. The results are consistent with the view that unexpected volatility reduces long-run growth and that expected volatility increases long-run growth. The results also suggest that the combined effect of expected and unexpected volatility is to reduce long-run growth for most countries and most time periods.     

The Growth Barriers of Informal Sector Enterprises: Evidence from India

The present study investigates the growth barriers of informal sector enterprises in India. The empirical analysis is based on the National Sample Survey Organization's unit‐level data for three years, 2000–2001, 2005–6, and 2010–11. The results of the study reveal: proprietary and large firms survive and grow; enterprises managed by women are less likely to decline; inadequate power supply poses a severe growth obstacle to all categories of firms; and proprietary firms encounter capital shortage while large firms are constrained by the non‐availability of raw materials. We do not find evidence of sub‐contracting acting as an enabling factor in firm growth.     

中间品进口对我国制造业行业人均产出的影响——对1999-2003年28个行业的实证研究

中间品进口一方面可以促进本国制造业企业的发展,另一方面也会对本国同类中间品生产厂商产生负面的竞争效应.本文综合考虑这两种影响,采用2002年投入产出表和相应行业的进出口数据将中间品进口分为水平型的中间品进口和垂直型的中间品进口.然后分析1999-2003年28个制造业行业的中间品进口对行业人均产出的影响.实证分析表明,水平型的中间品进口对行业人均产出的增长率只存在不显著的抑制作用;但是垂直型中间品进口对行业人均产出增长率有明显的正面影响.     

Hot Money and Business Cycle Volatility： Evidence from China

This paper investigates the link between hot money and business cycle volatility in China from January 1997 to December 2009. Using the structural vector error correction model we find a considerable degree of long-run cointegration and bidirectional causality effects between hot money and business cycle volatility. The speculative shocks are found to temporarily promote China＇s economic growth, but also to exacerbate business cycle volatility. The liquidity shock stemming from hot money is shown to be the primary factor responsible for the significantly enhanced fluctuation in business cycles during the most recent global financial crisis period This could be detrimental to the smooth operation of financial markets. Therefore, informing future policies, it is critical for policy-makers to take precautions against the speculative factors.