Budget deficits,money growth and causality: Further OECD evidence |
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| Institution: | 1. Instituto Argentino de Nivología, Glaciología y Ciencias Ambientales (IANIGLA-CONICET), 5500 Mendoza, Argentina;2. Facultad de Ciencias Económicas, Universidad Nacional de Cuyo, M5502JMA Mendoza, Argentina;3. Institut Ciència i Tecnologia Ambientals (ICTA), Universitat Autònoma de Barcelona, E-08193 Bellaterra, Spain;1. TBS Business School, Department of Economics and Finance, 1 Place A. Jourdain, Toulouse 31068, France;2. Toulouse School of Economics, University of Toulouse Capitole, 21 Allée de Brienne, Toulouse 31015, France |
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| Abstract: | This paper investigates the causal linkage between budget deficits and money growth in seven major OECD countries using multivariate Granger-causality tests combined with Akaike's AIC criterion and Zellner's iterative seemingly unrelated regressions. The accommodation hypothesis that deficits Granger-cause positive long-run changes in money growth is systematically rejected across all countries. The reverse hypothesis that money growth Granger-causes long-run changes in deficits is also rejected across countries. These results suggest that monetary and fiscal policies are set independently in each of the OECD countries. |
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