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

Apostolos Serletis and Asghar Shahmoradi ()

Macroeconomic Dynamics, 2006, vol. 10, issue 5, 652-666

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.

Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:10:y:2006:i:05:p:652-666_05

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