The Long-Run Relationship between Money, Nominal GDP, and the Price Level in Venezuela: 1950 to 1996

This paper explores whether a significant long-run relationship exists between money and nominal GDP and between money and the price level in the Venezuelan economy. We apply time-series econometric techniques to annual data for the Venezuelan economy for 1950 to 1996. An important feature of our analysis is the use of tests for unit roots and cointegration with structural breaks. Certain characteristics of the Venezuelan experience suggest that structural breaks may be important. Since the economy depends heavily on oil revenue, oil price shocks have had important influences on most macroeconomic variables. Also since the economy possesses large foreign debt, the world debt crisis that exploded in 1982 had pervasive effects on the Venezuelan economy. Radical changes in economic policy and political instability may have also significantly affected the movement of the macroeconomy. We find that a long-run relationship exists between narrow money (M1) and nominal GDP, the GDP deflator, and the CPI when one makes allowances for one or two structural breaks. We do not find such long-run relationships when broad money (M2) is used.

Dynamic Stock Market Interactions between the Canadian, Mexican, and the United States Markets: The NAFTA Experience

This paper explores the dynamic linkages that portray different facets of the joint probability distribution of stock market returns in NAFTA (i.e., Canada, Mexico, and the US). Our examination of interactions of the NAFTA stock markets considers three issues. First, we examine the long-run relationship between the three markets, using cointegration techniques. Second, we evaluate the dynamic relationships between the three markets, using impulse-response analysis. Finally, we explore the volatility transmission process between the three markets, using a variety of multivariate GARCH models. Our results also exhibit significant volatility transmission between the second moments of the NAFTA stock markets, albeit not homogenous. The magnitude and trend of the conditional correlations indicate that in the last few years, the Mexican stock market exhibited a tendency toward increased integration with the US market. Finally, we do note that evidence exists that the Peso and Asian financial crises as well as the stock-market crash in the US affect the return and volatility time-series relationships.