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In a bivariate VAR(1) between inflation and money supply, it is observed that a direct shock to inflation in period t leads to a change
In a bivariate VAR(1) between inflation and money supply, it is observed that a direct shock to inflation in period t leads to a change in inflation in the next period by 0.6%. Additionally, the correlation between the inflation shock and the money supply shock leads to a change in money supply, which in turn leads to a change in inflation by 0.14% in the same period. What percentage of the change in inflation can be attributed to the other variable (money supply)? Group of answer choices a. 70% b. 30% c. 81.08% d. 18.92%
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