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Money Supply, Inflation and Economic Growth: Co-Integration and Causality Analysis

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  • Hicham Ayad

    (University Centre of Maghnia,Algeria)

Abstract

The aim of this paper is to examine the relationship between money supply, inflation rate, and economic growth in the context of Algeria, using various econometric procedures as co-integration without and with structural breaks in addition to three different ways of causality test for the period 1970-2018, the results confirm the long-run relationship between the variables with more than three structural breaks, but with the absence of the effects of money supply and inflation rate on economic growth both in short run and long run terms, on the other hand, the causality results confirmed the existence of hidden causalities among the variables running from the cumulative components not from the natural series, and all the results support the Monetarist view of inflation though the absence of any effect of money supply on economic growth.

Suggested Citation

  • Hicham Ayad, 2020. "Money Supply, Inflation and Economic Growth: Co-Integration and Causality Analysis," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 65(2), pages 29-45, August.
    • Handle: RePEc:vrs:subboe:v:65:y:2020:i:2:p:29-45:n:3
    DOI: 10.2478/subboec-2020-0008
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    More about this item

    Keywords

    Money supply; Inflation; Co-integration; Hidden causality;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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