Working Paper: CEPR ID: DP9962
Authors: Stefan Gerlach; Rebecca Stuart
Abstract: Using annual data from several sources, we study the evolution of M1, M2, income, prices and long and short interest rates in Ireland over the period 1933-2012. We find cointegration and that prices, income and interest rates are weakly exogenous. While the estimates for M2 are stable and close to our priors, for M1 we obtain very low price elasticities, and a relatively high income elasticity, and detect parameter instability. We estimate a short-run M2 demand function that passes a number of diagnostic tests, although the standard errors of the regressions is large.
Keywords: historical statistics; income; Ireland; long time series; money; prices
JEL Codes: E3; E4; N14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| M1 (E51) | real GDP (E20) |
| M2 (E51) | real GDP (E20) |
| real GDP (E20) | M1 (E51) |
| real GDP (E20) | M2 (E51) |
| M1 (E51) | prices (P22) |
| M2 (E51) | prices (P22) |
| income (E25) | M2 (E51) |
| inflation (E31) | M2 (E51) |
| M2 (E51) | interest rates (E43) |
| M1 (E51) | interest rates (E43) |