Empirical explorations on money-income relationships and the effects of monetary policy

The research in this dissertation explores the issue of money-income relationships and the effects of monetary policy in the context of Bayesian VAR approach. The first essay reexamines the money-income relationships in bivariate model with three Bayesian priors. The second essay provides the theoretical foundations for Bayesian reference in linear VAR processes with an application of two particular informative priors. The final essay studies the effects of monetary policy by applying the Bayesian priors in a four-variable identified model. As results, the research in this dissertation has found that the relationships between money and income depend on the priors imposed in the underlying model: the money-income dynamics across different sample periods appear to be stable under certain priors yet unstable under other priors. This conclusion holds for both bivariate VAR model and multivariate VAR model with an identification. The third essay in this dissertation also provides the reasons behind this conclusion.