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When Markets Fail: Asset Prices, Government Expenditures, and the Velocity of Money

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  • WARBURTON, Christopher E.S.

Abstract

This paper examines the contributions of financial and macroeconomic variables to the revitalisation of a depressed US economy. Using time series data from 1957 to 2011 and a binary logistic regression model, it finds that government consumption expenditure and gross investment, real personal consumption expenditure, and the velocity of money provide robust possibilities for improving economic growth after the failure of financial and real markets. It concludes that policies that are oriented towards the revitalisation of economic growth should seriously consider the speed at which money circulates in contradistinction to the money stock and asset prices or the wealth effect.

Suggested Citation

  • WARBURTON, Christopher E.S., 2013. "When Markets Fail: Asset Prices, Government Expenditures, and the Velocity of Money," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(2), pages 73-92.
    • Handle: RePEc:eaa:aeinde:v:13:y:2013:i:2_6
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    Cited by:

    1. Warburton, C.E.S., 2014. "Macroeconometric Stabilization And Imf Policies: A Surveillance Of Inflation," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 23(4), pages 7-22.
    2. METAXAS, Theodore & TROMPATZI, Georgia, 2015. "From The Bank Panic Of 1907 To The Great Depression Of 1929 And The Savings And Loan Crisis Of The 1980s: Comparative Analysis And Lessons For The Future," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 15(1), pages 79-96.
    3. Emerson JACKSON & Mohamed JABBIE, 2020. "Twin Deficits Hypothesis as an Indication of Government Failure in Sierra Leone: An Empirical Investigation (1980-2018)," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 7(1), pages 42-68, January.
    4. Christopher E.S. WARBURTON & Jared PEMBERTON, 2023. "Volatile Financial Conditions, Asset Prices, and Investment Decisions: Analysis of daily data of DJIA and S&P500, from January to April of 2022," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 23(1), pages 101-124.
    5. WARBURTON Christopher E.S., 2014. "Time Dynamics Of Stabilization Theories And Responses To Debt And Financial Crises: An Analysis Of Mexico, Argentina, Nigeria And Ghana, 1960-2011," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 14(2).

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    More about this item

    Keywords

    Asset Prices; Liquidity Trap; Logit; Market Failure; Velocity of Money.;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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