The Relationship between Money Supply and the Rate of Inflation: A Causality Approach to the Study of the Jamaican Economy, 1961-2006
20 Pages Posted: 29 Mar 2015
Date Written: March 27, 2011
The objective of this paper is to test the hypothesis that there is a causal link between the rate of inflation and the rate of growth of money supply. Using quarterly data series for Jamaica during the period 1961 to 2006, the results show that there is a feedback effect between inflation and narrow money. On the other hand, there is a unidirectional causation running from inflation to quasi- and broad-money.
Keywords: Causality, inflation, money supply
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