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    M1 (RHS) Versus RGDP and NGDP

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    Florin Citu
    This document analyzes the relationship between M1 money supply, real GDP (RGDP), and nominal GDP (NGDP) in the US economy from 2001 to 2011. Granger causality tests show that increases in M1 Granger-cause increases in both NGDP and RGDP. Impulse response analyses further indicate that RGDP responds positively to an M1 increase after one quarter, while NGDP responds instantly to a rise in M1. The findings suggest that looser monetary policy and higher M1 growth can boost overall economic activity.

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    M1 (RHS) Versus RGDP and NGDP

    Uploaded by

    Florin Citu
    1K views6 pages
    This document analyzes the relationship between M1 money supply, real GDP (RGDP), and nominal GDP (NGDP) in the US economy from 2001 to 2011. Granger causality tests show that increases in M1 Granger-cause increases in both NGDP and RGDP. Impulse response analyses further indicate that RGDP responds positively to an M1 increase after one quarter, while NGDP responds instantly to a rise in M1. The findings suggest that looser monetary policy and higher M1 growth can boost overall economic activity.

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    RomaniaGDPM1

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    This document analyzes the relationship between M1 money supply, real GDP (RGDP), and nominal GDP (NGDP) in the US economy from 2001 to 2011. Granger causality tests show that increases in M1 Granger-cause increases in both NGDP and RGDP. Impulse response analyses further indicate that RGDP responds positively to an M1 increase after one quarter, while NGDP responds instantly to a rise in M1. The findings suggest that looser monetary policy and higher M1 growth can boost overall economic activity.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    1K views6 pages

    M1 (RHS) Versus RGDP and NGDP

    Uploaded by

    Florin Citu
    This document analyzes the relationship between M1 money supply, real GDP (RGDP), and nominal GDP (NGDP) in the US economy from 2001 to 2011. Granger causality tests show that increases in M1 Granger-cause increases in both NGDP and RGDP. Impulse response analyses further indicate that RGDP responds positively to an M1 increase after one quarter, while NGDP responds instantly to a rise in M1. The findings suggest that looser monetary policy and higher M1 growth can boost overall economic activity.

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    of 6

    10.

    20.0

    30.0

    40.0

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    M1 (rhs) versus RGDP and NGDP

    F L O R I N C I T U A D V I S O R Y

    NGDP RGDP M1

    2001Q1 2001Q2 2001Q3 2001Q4 2002Q1 2002Q2 2002Q3 2002Q4 2003Q1 2003Q2 2003Q3 2003Q4 2004Q1 2004Q2 2004Q3 2004Q4 2005Q1 2005Q2 2005Q3 2005Q4 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 -20.00 -10.00

    Granger causality test shows that M1 does influence NGDP


    Pairwise Granger Causality Tests Date: 06/06/12 Time: 00:15 Sample: 2001Q1 2011Q4 Lags: 3 Null Hypothesis: NGDP does not Granger Cause M1 M1 does not Granger Cause NGDP Obs 41 F-Statistic 0.40613 2.50910 Probability 0.74955 0.07526

    Pairwise Granger Causality Tests Date: 06/06/12 Time: 00:17 Sample: 2001Q1 2011Q4 Lags: 2 Null Hypothesis: NGDP does not Granger Cause M1 M1 does not Granger Cause NGDP Obs 42 F-Statistic 0.80556 4.27513 Probability 0.45452 0.02136

    F L O R I N C I T U A D V I S O R Y

    Granger causality test shows that M1 does influence RGDP


    Pairwise Granger Causality Tests Date: 06/06/12 Time: 00:19 Sample: 2001Q1 2011Q4 Lags: 3 Null Hypothesis: M1 does not Granger Cause RGDP RGDP does not Granger Cause M1 Obs 41 F-Statistic 3.25432 1.10426 Probability 0.03349 0.36084

    Pairwise Granger Causality Tests Date: 06/06/12 Time: 00:21 Sample: 2001Q1 2011Q4 Lags: 2 Null Hypothesis: M1 does not Granger Cause RGDP RGDP does not Granger Cause M1 Obs 42 F-Statistic 2.65023 1.73894 Probability 0.08401 0.18976

    F L O R I N C I T U A D V I S O R Y

    RGDP responds positively after one quarter to an increase in M1


    Response to Cholesky One S.D. Innovations 2 S.E.
    Response of RGDP to M1
    3

    -1

    -2 1 2 3 4 5 6 7 8 9 10

    F L O R I N C I T U A D V I S O R Y

    RGDP responds instantaneously to an increase in M1


    Response to Cholesky One S.D. Innovations 2 S.E.
    Response of NGDP to M1
    4 3 2 1 0 -1 -2 1 2 3 4 5 6 7 8 9 10

    F L O R I N C I T U A D V I S O R Y

    F L O R I N C I T U A D V I S O R Y
    Bucharest, Romania email:office@macroinvestadvisory.com Telephone: +40727642085

    F L O R I N C I T U A D V I S O R Y

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