Money, income, and causality in Pacific-Basin countries

Abstract

The causal relationship between money and income for tour Pacific-Basin countries, Japan, Taiwan, South Korea, and Thailand, are investigated. The unit root tests are performed first to obtain the appropriate level of integer difference for money and income. The results reveal some different patterns from the U.S. experience. Tests of causal relations are then performed. The empirical evidences suggest that there is a unidirectional causal relation running from money to income for Japan. However, for Taiwan, South Korea, and Thailand, there is no causal relation in either direction. The reason for these different results obtained in this study may be due to the institutional context of these countries such as small and/or open economies.