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VELOCITY AND THE VARIABILITY OF MONEY GROWTH: EVIDENCE FROM A VARMA, GARCH-M MODEL

Published online by Cambridge University Press:  13 June 2006

APOSTOLOS SERLETIS  and
AKBAR SHAHMORADI
APOSTOLOS SERLETIS
Affiliation:
University of Calgary
AKBAR SHAHMORADI
Affiliation:
University of Tehran
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Abstract

This paper uses recent advances in financial econometrics to test the Friedman hypothesis that money supply volatility Granger-causes velocity. Comparisons are made among simple-sum and Divisia velocity series at the M1 and M2 levels of monetary aggregation, using quarterly data from 1959:1 to 2004:3. The conclusion is that the Friedman hypothesis cannot be rejected if money supply volatility is modeled explicitly, using models that capture important volatility effects that previous work has ignored.

Keywords

Multivariate GARCHVariability of Money GrowthSimple-SumDivisia
Type
ARTICLES
Information
Macroeconomic Dynamics , Volume 10 , Issue 5 , November 2006 , pp. 652 - 666
Copyright
© 2006 Cambridge University Press

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