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Do Financial Aggregates Lead Activity?: A Preliminary Analysis

Author

Listed:
  • Michele Bullock

    (Reserve Bank of Australia)

  • Glenn Stevens

    (Reserve Bank of Australia)

  • Susan Thorp

    (Reserve Bank of Australia)

Abstract

It is frequently argued that an increase in the rate of growth of money or credit will lead to an increase in economic activity. This paper addresses this issue by looking at the lead/lag relationship between a range of financial aggregates and several measures of economic activity for Australia over the past decade. The paper concludes, on the basis of a range of tests, that monetary and credit aggregates tend to lag, or at best move contemporaneously with, economic activity. There is very little evidence that changes in the trend of money and credit portend future changes in economic activity.

Suggested Citation

  • Michele Bullock & Glenn Stevens & Susan Thorp, 1988. "Do Financial Aggregates Lead Activity?: A Preliminary Analysis," RBA Research Discussion Papers rdp8803, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp8803
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    File URL: https://www.rba.gov.au/publications/rdp/1988/8803.html
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    Cited by:

    1. Jammie H. Penm & R.D. Terrell, 1994. "Is Housing Activity a Leading Indicator?," The Economic Record, The Economic Society of Australia, vol. 70(210), pages 241-252, September.

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