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- Title
REEXAMINING THE QUANTITY THEORY OF MONEY: AN EMPIRICAL ANALYSIS FROM THE JOINT HYPOTHESIS.
- Authors
Cheng-Wen Lee; Huruta, Andrian Dolfriandra
- Abstract
The joint hypothesis test is a replicable interpretation of the quantity theory of money (QTM) when used as an inflation theory. This study examined the effect of money supply and gross domestic product (GDP) growth on inflation volatility. We used the crosscountry data of 40 countries, both in 2002 and 2014, from the World Bank publications. We analyzed the data using both the unrestricted regression model and joint hypothesis testing (the Wald test). The unrestricted regression results pointed inflation volatility in 40 countries was mostly driven by the monetary side, not by the real sector. Meanwhile, the joint hypothesis test demonstrated Strong Wald and Weak Wald test for the QTM prediction were rejected. These findings implied undesirable results from a monetarist perspective. We proposed an alternative method to confirm the joint hypothesis test from the QTM. It would be interesting to see whether our findings hold in other countries.
- Subjects
WORLD Bank; MONEY supply; GROSS domestic product; HYPOTHESIS
- Publication
Economic Review: Journal of Economics & Business / Ekonomska Revija: Casopis za Ekonomiju i Biznis, 2021, Vol 19, Issue 1, p3
- ISSN
1512-8962
- Publication type
Article
- DOI
10.51558/2303-680X.2021.19.1.3