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Monetary Targeting

Author

Listed:
  • Borivoje D. Krušković

    (Economics Faculty, University of Banja Luka)

  • Tina Maričić

Abstract

In this paper we test the existence of long-term relationship between money supply and inflation, money supply and GDP and money supply and unemployment. Three independent panel cointegration regressions are evaluated where money supply is the explanatory variable, while inflation, GDP and unemployment rates occur as dependent variables. The sample consists of 17 countries (Australia, Canada, Chile, Denmark, Israel, Japan, South Korea, Mexico, New Zealand, Poland, Switzerland, United Kingdom and United States). The data are annual and refer to the period from 1990 to 2013. The results of the empirical analysis in this paper show that there is no significant long-term relationship between inflation and money supply, while there is statistically significant long-term relationship between GDP and money supply, as well as between unemployment rates and the money supply.

Suggested Citation

  • Borivoje D. Krušković & Tina Maričić, 2015. "Monetary Targeting," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 4(3), pages 137-146.
    • Handle: RePEc:cbk:journl:v:4:y:2015:i:3:p:137-146
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    References listed on IDEAS

    as
    1. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(1), pages 147-180.
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    6. Mariano Kulish & Stephen Elias, 2013. "Direct effects of money on aggregate demand: another look at the evidence," Applied Economics, Taylor & Francis Journals, vol. 45(27), pages 3801-3809, September.
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    More about this item

    Keywords

    monetary targeting; inflation; money supply;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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