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The choice of appropriate monetary aggregates in the United Kingdom

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  • Mohammad Hasan

Abstract

This paper re-examines the relationship between alternative monetary aggregates (M0 and M4) and other macroeconomic variables in the United Kingdom. The results of a five-variable VAR analysis are indicative of bidirectional causality between each of the monetary aggregates and real output. Our findings of a feedback relationship between M0-real income, and M4-real income makes each of the monetary aggregates a poor intermediate target variable. Moreover, contrary to most research work in this area, we find a feedback relationship between M0 and prices which appears to support the monetary accomodation hypothesis.

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  • Mohammad Hasan, 1998. "The choice of appropriate monetary aggregates in the United Kingdom," Applied Economics Letters, Taylor & Francis Journals, vol. 5(9), pages 563-568.
    • Handle: RePEc:taf:apeclt:v:5:y:1998:i:9:p:563-568
    DOI: 10.1080/758529500
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    References listed on IDEAS

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    1. Breedon, F J & Fisher, P G, 1996. "M0: Causes and Consequences," The Manchester School of Economic & Social Studies, University of Manchester, vol. 64(4), pages 371-387, December.
    2. Paul Fisher & Juna Vega, 1993. "An Empirical Analysis of M4 in the United Kingdom," Bank of England working papers 21, Bank of England.
    3. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Paper 1227, Economics Department, Queen's University.
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