Empirical relationship among money, output and prices in Thailand

Using annual data for the period 1953-2013 or a shorter period 1977-2013, this paper investigates the relationship among money, output and prices in Thailand. The empirical results, obtained by three techniques, namely the Engle-Granger cointegration approach, Johansens cointegation approach and the autoregressive distributed lag (ARDL) bounds approach, suggest the presence of a cointegral-causal relation among money, output and prices, especially for the shorter sample period. Predictably, short-run causal relations also exist between money growth and inflation and between money growth and output growth. The empirical results obtained by a structural vector autoregression (SVAR) model are confirmatory, showing that the accumulated impulse responses of output and prices to monetary shocks are positive and significant. The overall results are consistent with classical monetary theory that money matters insofar its impacts on output and prices are concerned