A bootstrap-corrected causality test: Another look at the money-income relationship

Abdulnasser Hatemi-J, Manuchehr Irandoust

Research output: Contribution to journalArticlepeer-review

11 Citations (Scopus)


Previous studies of the causal relationship between money supply and real output are based on asymptotic distributions. If the assumption of normality is not fulfilled and if ARCH effects are present, asymptotic distributions perform inaccurately. In this paper, we reinvestigate the potential causal relationship between money and output by applying an alternative methodology based on the leveraged bootstrapped simulation techniques using data from Denmark, Japan, Sweden, and the US. We find unidirectional causality from money to output for the sample countries except for Sweden for which causality is bi-directional. This finding of unidirectional causality between money and output supports monetary business-cycle models and reveals one important policy implication-that is, in looking for the sources of output fluctuations, money might be a major factor.

Original languageEnglish
Pages (from-to)207-216
Number of pages10
JournalEmpirical Economics
Issue number1
Publication statusPublished - Mar 2006
Externally publishedYes


  • Granger causality
  • Leveraged bootstrap simulation
  • Money supply
  • Output growth

ASJC Scopus subject areas

  • Statistics and Probability
  • Mathematics (miscellaneous)
  • Social Sciences (miscellaneous)
  • Economics and Econometrics


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