Money growth variability and output: evidence with credit card-augmented Divisia monetary aggregates

Liu Jinan and Apostolos Serletis
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Liu Jinan: Department of Economics, University of Calgary, Calgary, Alberta, T2N 1N4, Canada

Studies in Nonlinear Dynamics & Econometrics, 2020, vol. 24, issue 5, 11

Abstract: We reexamine the effects of the variability of money growth on output, raised by Mascaro and Meltzer (1983), in the era of the increasing use of alternative payments, such as credit cards. Using a bivariate VARMA, GARCH-in-Mean, asymmetric BEKK model, we find that the volatility of the credit card-augmented Divisia M4 monetary aggregate has a statistically significant negative impact on output from 2006:7 to 2019:3. However, there is no effect of the traditional Divisia M4 growth volatility on real economic activity. We conclude that the balance sheet targeting monetary policies after the financial crisis in 2007–2009 should pay more attention on the broad credit card-augmented Divisia M4 aggregate to address economic and financial stability.

Keywords: credit card-augmented Divisia monetary aggregates; multivariate GARCH-in-mean; optimal monetary aggregation (search for similar items in EconPapers)
JEL-codes: C32 E44 E52 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1515/snde-2019-0106

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