Money and Velocity During Financial Crises: From the Great Depression to the Great Recession

Richard G. Anderson, Michael Bordo and John Duca

No 22100, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This study offers a single, consistent model that tracks the velocity of broad money (M2) since 1929, including the Great Depression, the global financial crisis, and the Great Recession. The model emphasizes the roles of changes in uncertainty and risk premia, financial innovation, and major banking regulations. Our findings suggest an enhanced role of a broad, liquid money aggregate as a policy guide during crises and their unwinding. Following crises, policymakers face the challenge of not only unwinding their balance sheet so as to prevent excess reserves from fueling a surge in M2, but also countering a fall in the demand for money as risk premia return to normal amid velocity shifts stemming from relevant financial reforms.

JEL-codes: E41 E50 G11 (search for similar items in EconPapers)
Date: 2016-03
New Economics Papers: this item is included in nep-cba, nep-his and nep-mac
Note: DAE
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Citations: View citations in EconPapers (17)

Published as Anderson, Richard G. & Bordo, Michael & Duca, John V., 2017. "Money and velocity during financial crises: From the great depression to the great recession," Journal of Economic Dynamics and Control, Elsevier, vol. 81(C), pages 32-49.

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Related works:
Journal Article: Money and velocity during financial crises: From the great depression to the great recession (2017)
Working Paper: Money and Velocity During Financial Crises: From the Great Depression to the Great Recession (2016)
Working Paper: Money and velocity during financial crises: from the Great Depression to the Great Recession (2015)
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