The Impact of Money Supply on the Economic Growth of United States

Chan, Hen Yin (2018) The Impact of Money Supply on the Economic Growth of United States. Final Year Project (Bachelor), Tunku Abdul Rahman University College.

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Abstract

This paper attempts to investigate the impact of money supply on the economic growth in United States. This paper also examines the short run and long run relationship, as well as the causal relationship between the money supply, real gross domestic product, inflation, trade balance (trade deficit) and foreign direct investment by employing annual data over the period 1976-2015. Towards these purposes, this paper employed unit root test, error correction model (ECM) techniques, Granger Causality test and other diagnostic tests. The long-run estimation results suggest that money supply, foreign direct investment, inflation have positive and statistically significant impacts on the U.S.’s economic growth, while trade balance (trade deficit) is found negatively impact the economic growth. Last but not least, there is a unidirectional causal relationship comes from money supply to economic growth.