Information variables and the monetary transmission mechanism in Australia

Gallagher, Paul. (1994). Information variables and the monetary transmission mechanism in Australia Honours Thesis, Dept. of Economics, The University of Queensland.

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Author Gallagher, Paul.
Thesis Title Information variables and the monetary transmission mechanism in Australia
School, Centre or Institute Dept. of Economics
Institution The University of Queensland
Publication date 1994
Thesis type Honours Thesis
Total pages 122
Language eng
Subjects 14 Economics
Formatted abstract
The nature of the relationships between money, credit, asset prices, interest rates, inflation, and output are examined for the case of Australia. The analysis presented is both theoretical and empirical. Ideas from some recent discussions about subsets of these six variables are drawn together to develop a complete (although closed economy) model of the monetary transmission mechanism in Australia today. Proxies for all of the above variables are then studied from the point of view of their information content for future changes in output. The empirical analysis takes the form of Granger tests supplemented by error correction terms when appropriate. The Granger tests suggest that the growth of the M3 money aggregate is an excellent predictor of output growth. Error correction models using all six variables to explain output growth suggest the existence of a long-run relationship between these six variables. Two structural VAR models are also modelled for comparison. They present a confusing picture, at odds with the Granger tests. The conclusion reached on the basis of the Granger tests is that proxies for money, credit, asset prices, and interest rates should be subjected to further empirical testing in the hope of developing a reliable forecasting model.

Document type: Thesis
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Created: Fri, 05 Nov 2010, 16:23:33 EST by Muhammad Noman Ali on behalf of The University of Queensland Library