An algorithm for estimating the volatility of the velocity of money
Murat Alikhanov and
Leon Taylor ()
MPRA Paper from University Library of Munich, Germany
Most macroeconomic models, such as the IS-LM, assume equilibrium in money markets. Since money demand is an inverse function of velocity, an inaccurate estimate of velocity will lead to errors in calculating the monetary and general equilibria. This note suggests a way to gauge the potential error in estimating velocity. The algorithm arises from the quantity equation of exchange, which one may prefer to an ad hoc model of velocity.
Keywords: monetary policy; simulations; forecasting in transitional economies; mathematical statistics in economics (search for similar items in EconPapers)
JEL-codes: E47 E52 E58 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:49313
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