Will Inflation Increase Crime Rate? New Evidence from Bounds and Modified Wald Tests

Abstract

This paper employs the modified Wald (MWALD) causality test to re-examine the relationship between crime and its determinants (inflation and unemployment) in the United States from 1960 to 2005. Bounds test approach is employed to investigate the existence of a long-run relationship. The empirical evidence suggests that inflation and crime rates are cointegrated with a positive relationship. Moreover, the causal link is from inflation and unemployment to crime.