A direct test of the endogeneity of money: Implications for Gulf Cooperation Council (GCC) countries

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TAŞ B. K. O. , Togay S.

ECONOMIC MODELLING, vol.29, no.3, pp.577-585, 2012 (Peer-Reviewed Journal) identifier identifier

  • Publication Type: Article / Article
  • Volume: 29 Issue: 3
  • Publication Date: 2012
  • Doi Number: 10.1016/j.econmod.2011.12.015
  • Journal Indexes: Social Sciences Citation Index, Scopus
  • Page Numbers: pp.577-585
  • Keywords: GCC Countries, Endogenous money supply, Monetary union, Post Keynesian monetary theory, SUPPLY ENDOGENEITY, EMPIRICAL-EVIDENCE, G7


This paper contributes to the ongoing discussion about the endogeneity of money supply by empirically investigating the GCC countries. We propose and implement a direct test of money supply endogeneity that depends on econometric specification of exogeneity which has not been used in the literature before. To be able to make comparisons with previous studies, we also conducted Granger Causality tests to analyze the causality relationship between bank credit and money supply. Both of the empirical studies provide empirical evidence for the endogeneity of money supply in GCC countries. The results of the paper have many significant monetary policy implications for the upcoming monetary unification of the GCC countries. (C) 2012 Elsevier B.V. All rights reserved.