MOHAMMAD S HASAN TABLE 3 Johansen's Maximum Likelihood Procedure for Cointegration Tests Vector LR statistics 95%critical values H H r=1 45.31 40.53 102.56 30.28 82.30 75.98 22.90 52.02 53.48 r三3 12.79 29.11 r≤4 11.65 16.32 20.18 r≤5 4.66 Note. Columns I and 2 are null and alternative hypotheses to test the value of r, of cointegration relations. Amas and Auase are two alternative test statistics based on m value and trace of the stochastic matrix, respectively. *denotes rejection of the null hy evidence of cointegration also rules out the possibility of spurious correlations and granger noncausality between price and the explanatory variables in Eq (4 Third, the dynamic modeling of the inflationary process has a valid error correction representation with a cointegrating constraint embedded in it. In sum, the above results suggest that, contrary to Huang(1995), a stable long-run linear relationship between price and the money stock does exist during both the prereform and postreform period in the mainland China. Following economic reform, as the economy is increasingly exposed to market forces, the nature and strength of relationships between the price level and money stock, and between the price level and money income ratio have been increased substan- 4. TEST RESULTS FOR GRANGER CAUSALITY Following the Granger representation theorem, the above unit root and cointe gration test results also imply that inflation and monetary growth can be given a dynamic specification using the error-correction models +∑83△logW+∑,△g-+∑8AP-evidence of cointegration also rules out the possibility of spurious correlations and Granger noncausality between price and the explanatory variables in Eq. (4). Third, the dynamic modeling of the inflationary process has a valid error￾correction representation with a cointegrating constraint embedded in it. In sum, the above results suggest that, contrary to Huang (1995), a stable long-run linear relationship between price and the money stock does exist during both the prereform and postreform period in the mainland China. Following economic reform, as the economy is increasingly exposed to market forces, the nature and strength of relationships between the price level and money stock, and between the price level and money income ratio have been increased substan￾tially. 4. TEST RESULTS FOR GRANGER CAUSALITY Following the Granger representation theorem, the above unit root and cointe￾gration test results also imply that inflation and monetary growth can be given a dynamic specification using the error-correction models: Dlog Pt 5 d0 1 w1jt21 1 O s51 n1 d1sDlog Pt2s 1 O s51 n2 d2sDlog Mt2s 1 O s51 n3 d3sDlog Wt2s 1 O s51 n4 d4sDgt2s 1 O s51 n5 d5sAPt2s 1 O s51 n6 d6sDIPt2s 1 n1t (5) TABLE 3 Johansen’s Maximum Likelihood Procedure for Cointegration Tests Vector LR statistics 95% critical values H0: H1: lmax ltrace lmax ltrace r 5 0 r 5 1 45.31* 127.62* 40.53 102.56 r # 1 r 5 2 30.28 82.30* 34.40 75.98 r # 2 r 5 3 22.90 52.02 28.27 53.48 r # 3 r 5 4 12.79 29.11 22.04 34.87 r # 4 r 5 5 11.65 16.32 15.87 20.18 r # 5 r 5 6 4.66 4.66 9.16 9.16 Note. Columns 1 and 2 are null and alternative hypotheses to test the value of r, i.e., the number of cointegration relations. lmax and ltrace are two alternative test statistics based on maximal eigen￾value and trace of the stochastic matrix, respectively. * denotes rejection of the null hypothesis at the 5% significance levels. 678 MOHAMMAD S. HASAN