Money supply behaviour in emerging economies: a comparative analysis

This paper reports new evidence consistent with the post-Keynesian hypothesis of money endogeneity for hitherto unexplored 10 emerging economies. These results were obtained using a vector error correction model to test for long-run and short-run causalities with data from 1996 to 2007. The evidence suggests that money supply is endogenous in five countries, namely China, the Czech Republic, India, Malaysia and Turkey; it is exogenous in Mexico, while there was no causality found in Indonesia, Russia and Taiwan. Thailand showed endogeneity in the long-run causality. Some suggestions are made to explain the mixed results, and we also discuss the limitations arising from our narrow specifications of the money supply and the models.