Is Money Really Exogenous? Testing for Weak Exogeneity in Swiss Money Demand

Andreas M. Fischer

15 citations0/0 files storedJournal of money credit and banking

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Monetary Policy and Economic Impact Economic Theory and Policy Economic theories and models

Abstract

Although exogeneity is often associated with controllable policy variables, Engle, Hendry, and Richard (1983) show that the one condition is neither necessary nor sufficient for the other. Whether variables such as monetary aggregates are (weakly) exogenous depends on the conditioning properties of the data generating process. Testing exogeneity claims represents an important step in analyzing money demand functions. Although Switzerland adheres to fairly strict monetarist prescriptions, we reject the hypothesis that M0 and M1 are weakly exogenous for a price equation. Our results for M1 support the conventional view in which money market equations reflect the demand for money as the dependent variable. Copyright 1993 by Ohio State University Press.

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2007A Two-Pillar Phillips Curve for Switzerland 2001The Demand for Money in Switzerland 1936-1995 1993Regression direction and weak exogeneity

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