Money,Income and Causality: Korea and Japan

Clearly understanding the true causal relationships among macroeconomic variables is essential for model specification and the selection of policy variables. The purpose of this comparative study is to analyze the casual relationships among macroeconomic variables—more specifically, between money and income in Korea and Japan. Empirical findings of two countries show the casual relationships between money and income which are different from each other and inconsistent with Mundell's suggestions. However, these inconsistencies might be explained theoretically through the different economic structures and situations of each country. [200]