Time scale decomposition of the relationship among money, output and price using wavelet analysis in the case of the Philippines
Date
2015-06
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Abstract
This study uses wavelet analysis to tease out the relationships among money, output and prices at different time scales. Employing spectral analysis and Granger causality tests, this study has shown that in the short run, money is non-superneutral - a result in line with the Monetary Business Cycle Theory and the New Keynesian Theory. In the short run, the growth in money supply leads to the growth in real output. On the other hand, from the intermediate run up to the very long run, money is found to be supeneutral. The growth rate of money supply does not affect real output growth, but only affects inflation. This finding is in line with the predictions of monetarism that inflation is always and everywhere a monetary phenomenon.
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Keywords
Money, Output, Prices