NO : WP-2019-001
AUTHOR : Taniya Ghosh, Prashant Mehul Parab
TITLE : Testing the Friedman-Schwartz Hypothesis Using Time Varying Correlation
ABSTRACT :
This study analyses the time varying correlation of money and output using the DCC GARCH model for
the Euro, India, Poland, the UK and the US. Apart from simple sum money, this model uses Divisia
monetary aggregate, which is theoretically shown as the actual measure of monetary services. The
inclusion of Divisia money affirms the Friedman-Schwartz hypothesis that money is procyclical. The
procyclical nature of association was not robustly observed in recent data when simple sum money was
used.
Keywords:DCC GARCH, Divisia, Monetary Aggregates, Real Output
JEL Code : C32, E52, E51
Weblink :http://www.igidr.ac.in/pdf/publication/WP-2019-001.pdf
