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Money Supply Endogeneity And Bank Stock Returns, Z. Badarudin, M. Ariff, A. Khalid
Money Supply Endogeneity And Bank Stock Returns, Z. Badarudin, M. Ariff, A. Khalid
Ahmed Khalid
This article presents results of tests on two related hypotheses on moneysupply. The first relates to an unresolved issue of money endogeneity whilethe second centres on the yet-explored relationship between money supplyand bank stock returns if money is found to be endogenous. Our results,using long-horizon data of Group of Seven (G-7) economies, supports causality in money supply as running from bank lending to bank deposits,a result that is predicted by the post-Keynesian money supply endogeneity(bank-credit-driven) theory. Thus, the result is not consistent withexogeneity proposition. A new evidence of positive relationship betweenendogenous money supply and aggregate bank stock return is statisticallysignificant …