Skip to main content

Research Repository

Advanced Search

Money, credit and spending: Drawing causal inferences

Caporale, Guglielmo Maria; Howells, Peter

Authors

Guglielmo Maria Caporale

Peter Howells



Abstract

It is widely accepted that loans cause deposits. Hitherto, though, the empirical evidence has come from bivariate causality tests which we now know can give rise to invalid inference if either of the two variables is causally influenced by some third, omitted, variable. In this paper we have used tests developed by Toda and Yamamoto to investigate the possibility that earlier inferences were incorrect because of the omission of a third relevant variable, total transactions in this particular case. Including the third variable requires us to revise some of the earlier inferences reported here, Howells and Hussein (1998). The most striking result, however, is that while deposits appear to be caused by total transactions (which could have invalidated the fundamental inference that loans cause deposits) our tests show that even in the presence of a third variable, the core of the endogeneity thesis prevails. Loans do cause deposits.

Citation

Caporale, G. M., & Howells, P. (2001). Money, credit and spending: Drawing causal inferences. Scottish Journal of Political Economy, 48(5), 547-557. https://doi.org/10.1111/1467-9485.00214

Journal Article Type Article
Publication Date Jan 1, 2001
Journal Scottish Journal of Political Economy
Print ISSN 0036-9292
Publisher Wiley
Peer Reviewed Not Peer Reviewed
Volume 48
Issue 5
Pages 547-557
DOI https://doi.org/10.1111/1467-9485.00214
Keywords money, credit, spending
Public URL https://uwe-repository.worktribe.com/output/1084753
Publisher URL http://dx.doi.org/10.1111/1467-9485.00214




Downloadable Citations