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- Title
Granger-Causality and Policy Effectiveness.
- Authors
Buiter, Willem H.
- Abstract
This article discusses the impact of monetary and fiscal policies on the economy. It is generally recognized that, if a set of monetary and fiscal policy variables Granger-cause' real economic variables, this does not imply that alternative deterministic rules for determining the values of these policy instruments will alter the joint density function of the real variables. Classical policy implications here means independence of the conditional means of real economic variables of the feedback rules for the monetary and fiscal policy variables, or more loosely that government manipulations of monetary and fiscal policy variables have no predictable effects on unemployment, output or the interest rate and hence are useless for pursuing counter-cyclical policy. Most of the statistical literature on Granger-causality has dealt with the relationship between Granger-causality and econometric exogeneity, independence of the regressors and the current and future values of the disturbances (pre-determinedness), or independence of the regressors and current, past and future values of the disturbances.
- Subjects
FISCAL policy; ECONOMIC policy; UNEMPLOYMENT; ECONOMICS; PUBLIC spending
- Publication
Economica, 1984, Vol 51, Issue 202, p151
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2554207