The lead-lag relationship of money, income and prices in Malaysia

The relationship between money and income provides a study for determining the direction of 'causation'. The issue is whether the direction runs from money to income as in the case of USA, or whether the direction is two-way as in the case of the UK and Singapore. For the latter two countries, there is no definite unidirectional causality. The concept of Granger causality provides an important framework and terminology for studying lead-lag relations between economic time series. Here the 'Granger causality' test is applied to Malaysia and to Singapore. Copyright © 1985 Singapore Economic Review.