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An investigation of causality between money supply and retail food prices in Canada /

This thesis addresses the issue of the existence of a causal relationship between the change in the food component of the consumer price index and change in the money supply (money base and M1) by using monthly Canadian data from January 1968 to March 1997. A bivariate vector autoregressive (VAR) model is used to describe the relationship between money supply and food price on the basis of identifying the two conditions that the three series are first difference stationary series and the money stock and price series are not cointegrated. Saunders' lag order selection criterion developed from Akaikes final prediction error (FPE), and Hsiao's lag selection procedure are used to identify the order of lags of each variable in VAR model. The models perform well through all diagnostic checks. All hypotheses are tested by using the likelihood ratio statistic and the chi2-statistic. The Granger test of causality is discussed and implemented in this research. By comparing the causality results of the seasonally adjusted series with those of seasonally unadjusted series we find that they are very sensitive to the seasonal adjustment of the series. For the seasonally adjusted series there is no relationship between money base (MB) and the food component of the consumer price index (FCPI) and there is a unidirectional causal relationship between M1 and FCPI (from M1 to FCPI). But for the seasonally unadjusted series there is a feedback relationship between M1 and FCPI and there is a unidirectional flow from MB to FCPI. The difference of the results is consistent with the findings of Sargent and other writers.

Identiferoai:union.ndltd.org:LACETR/oai:collectionscanada.gc.ca:QMM.20891
Date January 1998
CreatorsWu, Qionglin, 1964-
ContributorsBaker, L. (advisor)
PublisherMcGill University
Source SetsLibrary and Archives Canada ETDs Repository / Centre d'archives des thèses électroniques de Bibliothèque et Archives Canada
LanguageEnglish
Detected LanguageEnglish
TypeElectronic Thesis or Dissertation
Formatapplication/pdf
CoverageMaster of Science (Department of Agricultural Economics.)
RightsAll items in eScholarship@McGill are protected by copyright with all rights reserved unless otherwise indicated.
Relationalephsysno: 001641750, proquestno: MQ44315, Theses scanned by UMI/ProQuest.

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