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Table 1: MacKinnon critical values and the DF tδ ratios

Significance Lag No Constant, Constant & Constant(τµ ) Conclusion


level No Trend(τ ) Trend(ττ ) [tδ =-0.43]
[tδ =1.25] [tδ =-3.16]
0.01 3 -2.58 -4.02 -3.47
Linf 0.05 3 -1.94 -3.44 -2.88 Non-Stationary
0.10 3 -1.61 -3.14 -2.57

[tδ =-3.87] [tδ =-4.19] [tδ =-4.14]

0.01 2 -2.58 -4.02 -3.47


∆Linf 0.05 2 -1.94 -3.44 -2.88 Stationary
0.10 2 -1.61 -3.14 -2.57

[tδ =17.49] [tδ =4.11] [tδ =11.55]

0.01 0 -2.58 -4.02 -3.47


LM 0.05 0 -1.94 -3.44 -2.88 Non-Stationary
0.10 0 -1.61 -3.14 -2.57

[tδ =-2.17] [tδ =-6.06] [tδ =-3.56]

0.01 1 -2.58 -4.02 -3.47


∆LM 0.05 1 -1.94 -3.44 -2.88 Stationary
0.10 1 -1.61 -3.14 -2.57

[tδ =0.009] [tδ =-2.89] [tδ =-1.98]

0.01 0 -2.58 -4.02 -3.47


LD 0.05 0 -1.94 -3.44 -2.88 Non-Stationary
0.10 0 -1.61 -3.14 -2.57

[tδ =-12.46] [tδ =-12.42] [tδ =-12.43]

0.01 0 -2.58 -4.02 -3.47


∆LD 0.05 0 -1.94 -3.44 -2.88 Stationary
0.10 0 -1.61 -3.14 -2.57

[tδ =-0.20] [tδ =-2.60] [tδ =-1.89]

0.01 1 -2.58 -4.02 -3.47


LPar 0.05 1 -1.94 -3.44 -2.88 Non-Stationary
0.10 1 -1.61 -3.14 -2.57

[tδ =-15.33] [tδ =-15.27] [tδ =-15.33]

0.01 0 -2.58 -4.02 -3.47


∆LPar 0.05 0 -1.94 -3.44 -2.88 Stationary
0.10 0 -1.61 -3.14 -2.57
Table 2. Short-Run Dynamic Linear Regression Models of The Inflation Rate

Regressor Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7

Linft−1 1.01∗∗∗ 0.94∗∗∗ 1.04∗∗∗ 1.02∗∗∗ 1.04∗∗∗ 1.05∗∗∗ 1.07∗∗∗


(0.08) (0.08) (0.04) (0.08) (0.06) (0.06) (0.04)

Linft−2 0.13 0.14 0.11


(0.12) (0.10) (0.12)

Linft−3 -0.04 -0.23∗∗∗ 0.02 -0.16∗∗∗


(0.12) (0.08) (0.11) (0.05)

Linft−4 -0.19∗∗ -0.20∗∗∗ -0.15∗∗∗ -0.18∗∗ -0.17∗∗∗


(0.08) (0.05) (0.03) (0.08) (0.03)

LM 0.39∗∗∗ 0.39∗∗∗ 0.24∗∗∗ 0.45∗∗∗ 0.39∗∗∗ 0.45∗∗∗ 0.438∗∗∗


(0.14) (0.14) (0.07) (0.14) (0.14) (0.14) (0.143)

LMt−1 -0.34∗ -0.20 -0.34 -0.26 -0.26 -0.411∗∗∗


(0.20) (0.17) (0.21) (0.18) (0.17) (0.146)

LMt−2 0.07 -0.02


(0.21) (0.21)

LMt−3 0.15 -0.07 0.15


(0.20) (0.15) (0.19)

LMt−4 -0.27∗ -0.16∗ -0.22∗∗∗ -0.26∗ -0.17∗


(0.15) (0.09) (0.07) (0.15) (0.09)

LD -0.27 0.0006 0.0008 0.009 -0.001 0.014 -0.004


(0.02) (0.0184) (0.0176) 0.023 (0.018) (0.023) (0.01)

LPar 0.010 0.003 0.004


(0.007) (0.008) (0.008)

LPart−7 0.019∗ 0.022∗∗∗ 0.022∗∗∗ 0.020∗ 0.021∗∗∗


(0.011) (0.007) (0.008) (0.011) (0.007)

LPart−8 0.003 0.019∗∗ 0.003


(0.012) (0.008) (0.012)

Intercept 0.19∗∗∗ 0.25∗∗∗ 0.25∗∗∗ 0.19∗∗ 0.255∗∗∗ 0.20 0.22∗∗∗


(0.07) (0.06) (0.06) (0.07) (0.064) (0.07) (0.06)

R2 0.99 0.99 0.99 0.99 0.99 0.99 0.99

SER 0.109 0.10 1.49 0.11 0.10 1.51 1.49

F-statistic 1735.48 2120.02 3198.60 1797.63 2052.82 2016.526 3185.88

Standard errors are given in parentheses

Individual coefficiebts are statistically significant at the ***1%, **5% or *10% significance level
Table 3. Short-Run Regression Results for Model 7

Variable Coefficient Std.Error t-Statistic P-value

Linft−1 1.07 0.04 24.70 0.0000

Linft−4 -0.17 0.03 -4.51 0.0000

LM 0.43 0.14 3.05 0.0027

LMt−1 -0.41 0.14 -2.81 0.0057

LD -0.004 0.017 -0.25 0.7960

LPart−7 0.021 0.007 2.93 0.0039

Intercept 0.22 0.06 3.67 0.0003

R2 0.99

Adj.R2 0.99

SSR 0.99

SER 0.107

F-statistic 3185.887

Table 4. Diagnostic Test Results

Test H0 Test Statistic P-value Conclusion

Jarque-Bera Normally Distributed 11.60 0.003 Non-Normally Distributed

Breutsch- No Serial Correlation 0.82 0.66 No Serial Correlation


Godfrey-LM

ARCH No Heteroskedasticity 0.60 0.75 No Heteroskedasticity

White No Heteroskedasticity 4.45 0.61 No Heteroskedasticity


Explained SS 6.46 0.37

RESET- No Misspecification 1.89 0.07 No Misspecification


Test

Table 5. Chow Breakpoint Test;1997M07

F-Statistic 1.07 Probability 0.09


Log-Likelihood ratio 13.24 Probability 0.06

Table 6. Chow Breakpoint Test;2005M05

F-Statistic 1.06 Probability 0.39


Log-Likelihood ratio 8.02 Probability 0.33
Table 7. Wald test on long-run relationship of money supply

F-Statistic 751.892 Probability 0.0000


Table 8. Wald test on long-run
Chi-square 751.892relationship of parallel
Probability 0.0000premium

F-Statistic 895.43 Probability 0.0000


Table 9. WaldChi-square
test on long-run relationship
895.43 of 3-month-deposit
Probability 0.0000 rate

F-Statistic 731.48 Probability 0.0000


Chi-square 731.48 Probability 0.0000

Table 10. Granger Causality Test Between Inflation and Money Supply

Direction of causality Number of lags F-value P-value Decision

M → Inf 2 1.35 0.26 Do not Reject


Inf → M 2 1.67 0.19 Do not Reject
M → Inf 4 3.10 0.01 Reject
Inf → M 4 1.17 0.32 Do not Reject
M → Inf 6 2.81 0.01 Reject
Inf → M 6 1.51 0.17 Do not Reject
M → Inf 8 1.94 0.05 Reject at 10%
Inf → M 8 1.38 0.20 Do not Reject

Table 10. Granger Causality Test Between Inflation and Money Supply

Direction of causality Number of lags F-value P-value Decision

Pr → Inf 1 10.89 0.001 Reject


Inf → Pr 1 2.06 0.1531 Do not Reject
Pr → Inf 2 5.01 0.007 Reject
Inf → Pr 2 0.44 0.63 Do not Reject
Pr → Inf 3 2.73 0.04 Reject
Inf → Pr 3 0.36 0.78 Do not Reject
Pr → Inf 4 1.91 0.011 Reject
Inf → Pr 4 0.84 0.50 Reject
Pr → Inf 5 1.46 0.20 Reject
Inf → Pr 5 0.75 0.58 Reject