Recent discussions on financial platforms have reignited interest in the role of money supply growth as a critical economic indicator. With a focus on the potential implications of negative money supply growth, cited as a precursor to economic downturns, our comprehensive analysis seeks to unravel the complexities of this relationship.
Our initial exploration identified a small number of instances where money supply growth was negative, presenting an opportunity for a focused examination despite the statistical challenges posed by such a limited dataset.
Analysis Steps:
- Initial Data Examination: We began by identifying instances of negative money supply growth, despite the small sample size presenting statistical challenges.
- Stationarity Testing: To ensure the reliability of our time series analysis, we conducted Augmented Dickey-Fuller tests to test for stationarity in our data, a crucial step for accurate econometric modeling.
- Granger Causality Tests: Leveraging these tests, we explored whether past changes in money supply growth could predict future values of Real GDP Growth and the Unemployment Rate.
The Granger causality tests revealed significant insights:
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