The Relation of Money Supply and Economic Growth: Panel Granger Causality Test for Developing Countries

Abstract

This study aims to investigate the relationship between money supply and economic growth as applied in developing countries. For this purpose, Panel Cointegration and Panel Causality Analyses are performed by using the monthly data of 1997-2017 period. In these analyses, real GDP is used as dependent variable; M1, M2 and M3 money supply measures are used as independent variables. In accordance with the results of stationarity, cross sectional dependence and homogeneity tests, econometric analysis is done by Gengenbach, Urbain & Westerlund EC Cointegration and Dumitrescu & Hurlin Panel Granger Causality Tests. According to the results of the analysis, in developing countries, while there is a causality from money supply to economic growth in the short run, there is no relationship between these variables in the long run.