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The Comovment between Money and Economic Growth in 15 Asia-Pacific Countries: Wavelet Coherency Analysis in Time-Frequency Domain

Author

Listed:
  • Su-Ling TSAI

    (Department of International Trade, Shih Chien University at Kaohsiung, Taiwan.)

  • Tsangyao CHANG

    (Department of Finance, College of Finance, Feng Chia University, Taichung, Taiwan and CTBC Business School, Business Administration, Tainan, Taiwan.)

Abstract
The paper applies framework of the Wavelet-based measure of comovement from the Wavelet coherency analysis in Aguiar-Conraria and Soares (2011) to examine the comovement phenomenon and the causality of a lead-lag relationship between economic growth and money in 15 Asia-Pacific countries over about three decades. This is the first study to apply wavelet analysis in studying money and GDP lead-lag links in the Asia-Pacific countries. The main advantage of the wavelet approach is the ability to analyze transient dynamics between two time series across different frequencies or time scales. The use of the wavelet tool is superior to traditional tools because it allows us to determine how the series interact at different frequencies and how they evolve over time. The method allows us to identify both the causality and sign of correlation between our research variables. Therefore, through wavelet coherency and phase-difference analysis, this paper is the first study to identify certain period causality relationship of finance-growth, the lead-lag effect in 15 Asia-Pacific countries. In addition, our study has verified that monetary neutrality did support in some Asia-Pacific countries (i.e., Australia, Malaysia, Philippines, and South Korea). However, monetary policy did work in most of Asia-Pacific countries. The empirical results have important policy implications for these 15 Asia-Pacific countries conducting monetary policy to boot up its economy.

Suggested Citation

  • Su-Ling TSAI & Tsangyao CHANG, 2018. "The Comovment between Money and Economic Growth in 15 Asia-Pacific Countries: Wavelet Coherency Analysis in Time-Frequency Domain," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 63-79, December.
    • Handle: RePEc:rjr:romjef:v::y:2018:i:2:p:63-79
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    References listed on IDEAS

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