Liquidity supply and money velocity co-movements in the Eurozone - Time-Frequency Domain Approach

Svatopluk Kapounek and Jitka Poměnková

Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 2012, vol. 60, issue 2, 109-116

Abstract: The authors focus on financial stability in the Eurozone and propose alternative indicator for macro-prudential policy implementation. Rapid growth of the shadow banking system biases increase in loans to identify financial instability. The velocity of money represented money demand in the economy. The empirical part of the paper applies wavelet analysis to identify cyclical co-movements in money velocity and liquidity supply. The authors provide recommendations for policymakers to stabilize global liquidity shocks and reduce procyclical effects by institutions which supply official liquidity in their domestic currency - central banks.

Keywords: financial stability; macro-prudential policy; credit money creation; money endogeneity; wavelet analysis (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:mup:actaun:actaun_2012060020109

DOI: 10.11118/actaun201260020109

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