Authors: Olaolu Richard Olayeni; Aviral Kumar Tiwari; Reza Sherafatian-Jahromi; Olagbaju Ifeolu Oladiran
Addresses: Faculty of Social Sciences, Department of Economics, Obafemi Awolowo University, Room 109A, FSS Building, 220005, Ile-Ife, Nigeria ' Faculty of Applied Economics, Faculty of Management Studies, ICFAI University Tripura, Tripura, Kamalghat, Sadar, West Tripura, 799210, India ' Department of Economics, Universiti Putra Malaysia, 43400UPM Serdang, Selangor, Malaysia ' Faculty of Social Sciences, Department of Economics, Obafemi Awolowo University, Room 237, FSS Building, 220005, Ile-Ife, Nigeria
Abstract: We investigated the relationship among inflation, output gap, and money in the time-frequency space for Malaysia over the period 1986:2-2008:12. We utilised the wavelet coherence and phase difference in continuous wavelet analysis and multiresolution in discrete wavelet analysis. We then developed a DWT-based Diebold-Yilmaz index to measure scale-specific spillover. First, we used the approaches to examine the strength, co-movement, and synchronisation among the variables. We further examined whether the relationship is cyclical or anti-cyclical. Wavelet coherence and phase difference show that money growth and output gap are coherent in low and middle frequencies. Moreover, we found output gap to be a leading variable often. We also noticed evidence of both cyclical and anti-cyclical relationships among the variables. The DWT-based Diebold-Yilmaz spillover index shows the extent of the dynamic interactions among the variables both over time and over frequency.
Keywords: inflation; output gap; money; wavelet coherence; spillover index; Malaysia; phase difference; continuous wavelet analysis; multiresolution; discrete wavelet analysis; DWT; discrete wavelet transform.
International Journal of Computational Economics and Econometrics, 2014 Vol.4 No.3/4, pp.320 - 338
Available online: 14 Sep 2014 *Full-text access for editors Access for subscribers Purchase this article Comment on this article