Money Growth Uncertainty and Real Output: Trivariate VAR GARCH-M Model

Seungjun Lee
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Seungjun Lee: Chonnam National University

Korean Economic Review, 1998, vol. 14, 23-40

Abstract: Unlike previous literatures investigating the relationship between inflation un-certainty and rail variables, we investigate the Friedman 's hypothesis by observing empirically the relationship between money growth uncertainty and real output We generated money growth uncertainty data by employing GARCH-M model and at the same time examined the empirical validity of the hypothesis in the U.S economy. We found that the empirical results did provide support on our claim that money grouth uncertainty in stead of the inflation uncertainty neg-atively affects real output growth. Also, allowing parameters of the money growth equation in the VAR GARCH-M model to exhibit discrete changer at the third quarter of 1979 and 1982 brings richer specification for capturing deterministic shifts in the monetary regime.

Keywords: Money Growth Uncertainty; Real Output; Trivarite VAR GARCH-M (search for similar items in EconPapers)
JEL-codes: C53 E31 E52 (search for similar items in EconPapers)
Date: 1998
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