Table 1 shows the results of Dickey-Fuller stationarity tests for the nominal money supply, producer price inflations, nominal GDPs, and nominal exchange rates for all three CEFTA countries.
Dickey-Fuller Tests for Stationarity Tests Poland Hungary Czech Republic Level Variables Money Supply -1.390 1.403 -0.308 Producer Price Inflations -0.633 0.242 -1.194 Nominal GDPs -0.501 0.447 -1.499 Nominal Exchange Rates -0.345 0.602 -3.135 First Differences of Variables Money Supply -89.499 -93.942 -120.055 Producer Price Inflations -70.174 -71.024 -100.580 Nominal GDPs -106.557 -114.848 -64.156 Nominal Exchange Rates -74.947 -100.442 -103.736 Granger Causality Tests Hypotheses Poland Hungary Czech Republic Nominal money supply Granger-causes nominal GDP.
The hypothesis that a change in the nominal money supply Granger-causes the change in the nominal GDP is accepted for the Czech Republic and Poland but rejected for Hungary.
Second, nominal GDP Granger-causes the nominal money supply in Poland and the Czech Republic but not in Hungary.
Differences in the causal relationships between the nominal money supply and nominal GDP between Poland and the Czech Republic on one hand and Hungary on the other can again be explained by differences in domestic financial sectors, unrelated to the domestic money supply process.