چکیده:
This paper investigates the endogenous money supply hypothesis in Iran. To this end, we attempt to find causality directions between bank credits and money aggregates. Utilizing Diks and Panchenko’s (2006) nonparametric Granger causality test for the time series data over the period 2006:04-2018:12 confirms the existence of a significant causality running from bank credits to money aggregates. These results indicate that money supply in Iran is demand-determined, which is in line with Post-Keynesians’ money supply endogenous theory. In this case, following the interest rate targeting rather than the monetary aggregate targeting approach and therefore, applying open market operation is necessary.
خلاصه ماشینی:
Utilizing Diks and Panchenko’s (2006) nonparametric Granger causality test for the time series data over the period 2006:04-2018:12 confirms the existence of a significant causality running from bank credits to money aggregates.
Keywords: Endogenous Money Supply, Post Keynesian Hypothesis, Nonparametric Econometrics, Granger Causality Test JEL Classification: C14, C32, E52, E58.
To investigate whether the nature of the money supply is exogenous or endogenous, many empirical researchers have applied linear Granger causality tests to investigate the causal relationship between bank credits and money aggregates.
Using cointegration and VECM approaches in the context of a time series analysis, in addition to applying a Granger causality test, showed that credit money was endogenously determined by the response of the banking system to the demand for loans.
Using a standard Granger causality test, Ahmad and Ahmed (2006) investigated money supply endogeneity in Pakistan for 1980-2003.
Haghighat (2011) applied cointegration and causality tests for the annual time series data (1968 to 2009) of Iran and found consistent evidence with the Post Keynesian hypothesis on money supply endogeneity.
All the above-mentioned empirical studies, which intended to test the money supply endogeneity hypothesis, employed linear Granger causality tests.
Therefore, to overcome this shortcoming and find more precise results, this paper applies a nonparametric test proposed by Diks and Panchenko (2006) to examine Granger causality between bank credits and money aggregates.
The results of the nonparametric Granger causality test showed that bank credits significantly caused money aggregates.